I have had more success just doing it manually ...
Set-up USB stick with these directions ...
http://www.freesoftwaremagazine.com/...tro?page=0%2C0
Copy contents of your puppy cd to a partition on your USB stick.
Then configure grub to point to the relevant files that you just copied over.
This is what your grub command should look something like ...
default=0
timeout=10
title PIZZAPUP
root (hd0,4)
kernel /vmlinuz root=/dev/ram0 nopcmcia
initrd /initrd.gz