Windows is routinely shipped on ROM
(it's known as "embedded") and has been around from the old NT3 days to the present
PDAs and smartphones use windows ce
and some "non computer" boxes such as BT's vision box.
and a couple of HDD\dvd recorders
the xbox
Even some washing machines.
some (un?)expected kit such as routers, firewalls and hardware virus boxes use server based versions
it's quite easy to create a CD\DVD\memory stick\flash based windows installs.
http://en.wikipedia.org/wiki/BartPE (gives you an idea)
the PE environment is legal and forms the basis of quite a few repair utilities' startup discs
(I still cook my own multiboot utility disc (windows98+XP) and am fiddling with Vista (which microsoft themselves install from a vista pe startup disc)
but at the moment XP is smaller and easier to configure
and there are lots of pirate "distros" knocking about
Ironically it's a linux based bootstrap that forms the basis of the menu system
http://www.magiciso.com/tutorials/miso-create- multi-os-cd.htm