I've used network installs of Ubuntu since 2009. It's really a convenient way to install and pre-configure new desktops. I can set up a new Linux workstation in under 15 minutes with only about 2 minutes of my time involved. When it's done, there's nothing else to do - it is already configured for our domain authentication, has certain applications preinstalled and even configures a couple of Internet shortcuts in Chrome that will be ready when a user logs in.
Unfortunately, it's just not working with Ubuntu 16.04 Xenial. There appears to be a bug in Ubuntu in the network installer that causes it to prepend "/cdrom" to the path you give for the live-installer filesystem. It makes my path of:
which obviously is incorrect.
So, if you're struggling with setting up PXE installs of Ubuntu 16.04, you might just have to wait until Ubuntu fixes this problem. This is why I get frustrated with Ubuntu LTS releases. They claim to be corporate or enterprise focused, but they tend to break things that businesses regularly use.
PXE has been broken or changed without documentation before, and I've struggled with bugs in LDAP authentication with previous LTS releases. It just shows me they don't actually test a lot of the corporate use cases before release. I think that's where Red Hat has an edge on them.
Ultimately, Canonical will fix this bug. Usually the things I run into in a new LTS release are fixed with the first service pack, but really, about 20 minutes of testing of the PXE install image would have uncovered this.