Okay so, just making a bootable ISO didn't exactly work in my case, but I did finally get it to work. Also I found that the instructions at http://florian.freundt.org/blog/?p=161
work great for some ISOs, not so great for others. For my bootable USB image to work on my multi-boot usb, I had to have both a plain copy of the bootable USB files, and the whole ISO. I also used the memdisk file from syslinux and my grub entry looked like this:
Yeah, it seems very hacky to have 2 copies of the bootable USB stick on the multi-boot USB stick, but its a funny USB stick to begin with so it doesn't surprise me. Its like it uses the image to boot, then reads the regular files off the USB stick. It does take a long time to load (i think its the time it takes to copy the 500MB iso to memory). This may not help anybody, but I thought I'd tell ya'll how I finally got it to work, cause I hate it when someone replies with "I got it working" and no details.
I tried to boot an Xubuntu Live CD iso the same way other isos are booted in the freundt.org instructions, but it didn't work (i got into a busybox shell). If you're interested in putting a "liveCD" version of Ubuntu (or Xubuntu or Kubuntu or etc...) on a USB stick, I found the section titled "Create Bootable USB Manually" at this link: https://help.ubuntu.com/community/In...n/FromUSBStick
had all the info I needed to create a bootable Xubuntu part of my multiboot stick. (Amazingly fast boot times btw, I was shocked how quick it loaded the first time).
Anyways, I'm gonna mark this thread as solved, if anyone has any more insight into a better way of doing this, let me know.