Well I've finally manged to solve this using the command redhat-config-packages --tree=/mnt/source.
On the server I defined /mnt/inst in /etc/export to ensure that other machines on the LAN could mount the the folder. To facilitate this I set up a new folder called /mnt/source on the client machine. Then mounted the installation folder from the client machine with
mount -t nfs 192.168.1.10:/mnt/inst /mnt/source
(As a more permanent feature this should be place in in fstab.conf). The address 192.168.1.10 can also be replace by the server hostname provide it has been defined in /etc/hosts on the client machine.
I have also created a link to automatically run Add/Remove Packages via LAN. So now I can use either the Lan or CDs from one mouse click.
PS - the netaddr above for Linux1 should read 192.168.1.50