diff --git a/src/.config b/src/.config
index e1a732a2d..26e7da859 100644
--- a/src/.config
+++ b/src/.config
@@ -24,3 +24,31 @@ BUSYBOX_SOURCE_URL=http://busybox.net/downloads/busybox-1.24.2.tar.bz2
 #
 SYSLINUX_SOURCE_URL=https://www.kernel.org/pub/linux/utils/boot/syslinux/syslinux-6.03.tar.xz
 
+###   ###   ###
+###   ###   ###
+###   ###   ###
+
+# Use predefined '.config' file when building the kernel. This overrides the config generation
+# in '02_build_kernel.sh' and uses the config file provided in this parameter. You can comment,
+# leave undefined or use nonexisting file in order to disable the property and rely on automatic
+# config generation.
+#
+# KERNEL_CONFIG_FILE=kernel.config
+
+# Use predefined '.config' file when building BusyBox. This overrides the config generation in
+# '07_build_busybox.sh' and uses the config file provided in this parameter. Leave undefined or
+# comment the property in order to disable it and rely on automatic config generation.
+#
+# BUSYBOX_CONFIG_FILE=busybox.config
+
+# Define the overlay type to use. Possible values are 'sparse' and 'folder'. You can use any other
+# value, no value, or comment the property in order to disable it.
+#
+# sparse - use sparse file with hardcoded maximal size of 1MB (see 11_generate_iso.sh). This option
+#          requires root permissions. The generated ISO image is larger. 
+#
+# folder - use normal folder structure. Currently this doesn't work if the file system is 'vfat'
+#          because FAT requires special handling, e.g. POSIX overlay (http://sf.net/p/posixovl).
+#
+OVERLAY_TYPE=sparse
+
diff --git a/src/02_build_kernel.sh b/src/02_build_kernel.sh
index c48a546b3..56a01d538 100755
--- a/src/02_build_kernel.sh
+++ b/src/02_build_kernel.sh
@@ -1,23 +1,35 @@
 #!/bin/sh
 
+SRC_DIR=$(pwd)
+
 cd work/kernel
 
 # Change to the first directory ls finds, e.g. 'linux-4.4.6'.
 cd $(ls -d *)
 
 # Cleans up the kernel sources, including configuration files.
-make mrproper
+# make mrproper
 
-# Create default configuration file for the kernel.
-make defconfig
+# Read the 'KERNEL_CONFIG_FILE' property from '.config'
+KERNEL_CONFIG_FILE="$SRC_DIR/$(grep -i KERNEL_CONFIG_FILE $SRC_DIR/.config | cut -f2 -d'=')"
 
-# Changes the name of the system to 'minimal'.
-sed -i "s/.*CONFIG_DEFAULT_HOSTNAME.*/CONFIG_DEFAULT_HOSTNAME=\"minimal\"/" .config
+if [ -f $KERNEL_CONFIG_FILE ] ; then
+  # Use predefined configuration file for the kernel.
+  cp $KERNEL_CONFIG_FILE .config
+else
+  # Create default configuration file for the kernel.
+  make defconfig
 
-# Enable overlay support, e.g. merge ro and rw directories.
-sed -i "s/.*CONFIG_OVERLAY_FS.*/CONFIG_OVERLAY_FS=y/" .config
+  # Changes the name of the system to 'minimal'.
+  sed -i "s/.*CONFIG_DEFAULT_HOSTNAME.*/CONFIG_DEFAULT_HOSTNAME=\"minimal\"/" .config
 
-# Compile the kernel with optimization for "parallel jobs" = "number of processors".
+  # Enable overlay support, e.g. merge ro and rw directories.
+  sed -i "s/.*CONFIG_OVERLAY_FS.*/CONFIG_OVERLAY_FS=y/" .config
+fi
+
+exit 0
+
+# Compile the kernel with optimization for 'parallel jobs' = 'number of processors'.
 # Good explanation of the different kernels:
 # http://unix.stackexchange.com/questions/5518/what-is-the-difference-between-the-following-kernel-makefile-terms-vmlinux-vmlinux
 make bzImage -j $(grep ^processor /proc/cpuinfo | wc -l)
diff --git a/src/07_build_busybox.sh b/src/07_build_busybox.sh
index 672217139..bbb1f19a9 100755
--- a/src/07_build_busybox.sh
+++ b/src/07_build_busybox.sh
@@ -1,5 +1,7 @@
 #!/bin/sh
 
+SRC_DIR=$(pwd)
+
 # Find the glibc installation area.
 cd work/glibc
 cd $(ls -d *)
@@ -13,10 +15,25 @@ cd work/busybox
 cd $(ls -d *)
 
 # Remove previously generated artifacts.
-make distclean
+# make distclean
 
-# Create default configuration file.
-make defconfig
+# Read the 'BUSYBOX_CONFIG_FILE' property from '.config'
+BUSYBOX_CONFIG_FILE="$SRC_DIR/$(grep -iBUSYBOX_CONFIG_FILE $SRC_DIR/.config | cut -f2 -d'=')"
+
+if [ -f $BUSYBOX_CONFIG_FILE ] ; then
+  # Use predefined configuration file for Busybox.
+  cp $BUSYBOX_CONFIG_FILE .config
+else
+  # Create default configuration file.
+  make defconfig
+  
+  # The 'inetd' applet fails to compile because we use the glibc installation area as
+  # main pointer to the kernel headers (see 05_prepare_glibc.sh) and some headers are
+  # not resolved. The easiest solution is to ignore this particular applet. 
+  sed -i "s/.*CONFIG_INETD.*/CONFIG_INETD=n/" .config
+fi
+
+exit 0
 
 # This variable holds the full path to the glibc installation area as quoted string.
 # All back slashes are escaped (/ => \/) in order to keep the 'sed' command stable.
@@ -25,11 +42,6 @@ GLIBC_INSTALLED_ESCAPED=$(echo \"$GLIBC_INSTALLED\" | sed 's/\//\\\//g')
 # Now we tell BusyBox to use the glibc installation area.
 sed -i "s/.*CONFIG_SYSROOT.*/CONFIG_SYSROOT=$GLIBC_INSTALLED_ESCAPED/" .config
 
-# The 'inetd' applet fails to compile because we use the glibc installation area as
-# main pointer to the kernel headers (see 05_prepare_glibc.sh) and some headers are
-# not resolved. The easiest solution is to ignore this particular applet. 
-sed -i "s/.*CONFIG_INETD.*/CONFIG_INETD=n/" .config
-
 # Compile busybox with optimization for "parallel jobs" = "number of processors".
 make busybox -j $(grep ^processor /proc/cpuinfo | wc -l)
 
diff --git a/src/08_generate_rootfs.sh b/src/08_generate_rootfs.sh
index 221c78be6..e8d16ac77 100755
--- a/src/08_generate_rootfs.sh
+++ b/src/08_generate_rootfs.sh
@@ -18,234 +18,26 @@ cd busybox
 cd $(ls -d *)
 
 # Copy all BusyBox generated stuff to the location of our 'initramfs' folder.
-cp -R _install ../../rootfs
+cp -r _install ../../rootfs
+
+# Copy all rootfs stuff to the location of our 'initramfs' folder.
+cp -r ../../../08_generate_rootfs/* ../../rootfs
+
 cd ../../rootfs
 
 # Remove 'linuxrc' which is used when we boot in 'RAM disk' mode. 
 rm -f linuxrc
 
-# Create the missing root FS folders.
-mkdir etc
-mkdir dev
-mkdir lib
-mkdir mnt
-mkdir proc
-mkdir root
-mkdir src
-mkdir sys
-mkdir tmp
-
-cd etc
-
-# The script '/etc/prepare.sh' is automatically executed as part of the '/init'
-# process. We suppress most kernel messages and mount all cryitical file systems.
-cat > prepare.sh << EOF
-#!/bin/sh
-
-dmesg -n 1
-
-mount -t devtmpfs none /dev
-mount -t proc none /proc
-mount -t tmpfs none /tmp -o mode=1777
-mount -t sysfs none /sys
-
-EOF
-
-chmod +x prepare.sh
-
-# The script '/etc/switch.sh' is automatically executed as part of the '/init'
-# process. We overlay the '/minimal/rootfs' folder from the boot media, copy all
-# files and folders to new mountpoint and then execute the command 'switch_root'.
-cat > switch.sh << EOF
-#!/bin/sh
-
-# Create the new mountpoint in RAM.
-mount -t tmpfs none /mnt
-
-# Create folders for all critical file systems.
-echo "Create folders for all critical file systems..."
-mkdir /mnt/dev
-mkdir /mnt/sys
-mkdir /mnt/proc
-mkdir /mnt/tmp
-echo "...done."
-
-# Copy root folders in the new mountpoint.
-echo "Copying the root file system to /mnt..."
-cp -a bin etc lib lib64 root sbin src usr /mnt
-echo "...done."
-
-mkdir /tmp/mnt
-echo "Searching available devices for /minimal/rootfs folder..."
-for DEVICE in /dev/* ; do
-  DEV=\$(echo "\${DEVICE##*/}")
-  SYSDEV=\$(echo "/sys/class/block/\$DEV")
-
-  case \$DEV in
-    *loop*) continue ;;
-  esac
-
-  if [ ! -d "\$SYSDEV" ] ; then
-    continue
-  fi
-
-  mount \$DEVICE /tmp/mnt 2>/dev/null
-  if [ -d /tmp/mnt/minimal/rootfs ] ; then
-    echo "  Found /minimal/rootfs folder on device \$DEV."
-    
-    touch /tmp/mnt/minimal/rootfs/minimal.pid 2>/dev/null
-    if [ -f /tmp/mnt/minimal/rootfs/minimal.pid ] ; then
-      echo "  Trying to overlay in read/write mode..."
-      rm -f /tmp/mnt/minimal/rootfs/minimal.pid
-      mount -t overlay -o lowerdir=/mnt,upperdir=/tmp/mnt/minimal/rootfs,workdir=/tmp/mnt/minimal/work none /mnt
-      OUT=\$?
-      if [ ! "\$OUT" = "0" ] ; then
-        echo "  Mount failed (probably on vfat), moving on with other devices."
-        umount /tmp/mnt 2>/dev/null
-        continue
-      fi
-    else
-      echo "  Trying to overlay in read only mode..."
-      mkdir -p /tmp/minimal/work
-      mkdir -p /tmp/minimal/rootfs
-      mount -t overlay -o lowerdir=/mnt:/tmp/mnt/minimal/rootfs,upperdir=/tmp/minimal/rootfs,workdir=/tmp/minimal/work none /mnt
-    fi
-    
-    echo "  ...done."
-    
-    break
-  else
-    umount /tmp/mnt 2>/dev/null
-  fi
-done
-echo "...done."
-
-# Move critical file systems to the new mountpoint.
-echo "Remounting /dev, /sys, /tmp and /proc in /mnt..."
-mount --move /dev /mnt/dev
-mount --move /sys /mnt/sys
-mount --move /proc /mnt/proc
-mount --move /tmp /mnt/tmp
-echo "...done."
-
-# The new mountpoint becomes file system root. All original root folders are
-# deleted automatically as part of the command execution. The '/sbin/init' 
-# process is invoked and it becomes the new PID 1 parent process.
-exec switch_root /mnt /sbin/init
-
-echo "You can never see this... unless there is a serious bug..."
-sleep 99999
-
-EOF
-
-chmod +x switch.sh
-
-# The script '/etc/bootscript.sh' is automatically executed as part of the
-# '/sbin/init' proess. All core boot configuration has been completed and now we
-# need to do the rest of the configuration on the user space level. Here we loop
-# through all available network devices and we configure them through DHCP.
-cat > bootscript.sh << EOF
-#!/bin/sh
-
-echo "Welcome to \"Minimal Linux Live\" (/sbin/init)"
-
-for DEVICE in /sys/class/net/* ; do
-  echo "Found network device \${DEVICE##*/}" 
-  ip link set \${DEVICE##*/} up
-  [ \${DEVICE##*/} != lo ] && udhcpc -b -i \${DEVICE##*/} -s /etc/rc.dhcp
-done
-
-EOF
-
-chmod +x bootscript.sh
-
-# The script '/etc/rc.dhcp' is automatically invoked for each network device. 
-cat > rc.dhcp << EOF
-#!/bin/sh
-
-ip addr add \$ip/\$mask dev \$interface
-
-if [ "\$router" ]; then
-  ip route add default via \$router dev \$interface
-fi
-
-if [ "\$ip" ]; then
-  echo "DHCP configuration for device \$interface"
-  echo "ip:     \$ip"
-  echo "mask:   \$mask"
-  echo "router: \$router"
-fi
-
-EOF
-
-chmod +x rc.dhcp
-
-# DNS resolving is done by using Google's public DNS servers.
-cat > resolv.conf << EOF
-nameserver 8.8.8.8
-nameserver 8.8.4.4
-
-EOF
-
-# The file '/etc/welcome.txt' is displayed on every boot of the system in each
-# available terminal.
-cat > welcome.txt << EOF
-
-  #####################################
-  #                                   #
-  #  Welcome to "Minimal Linux Live"  #
-  #                                   #
-  #####################################
-
-EOF
-
-# The file '/etc/inittab' contains the configuration which defines how the
-# system will be initialized. Check the following URL for more details:
-# http://git.busybox.net/busybox/tree/examples/inittab
-cat > inittab << EOF
-::sysinit:/etc/bootscript.sh
-::restart:/sbin/init
-::ctrlaltdel:/sbin/reboot
-::once:cat /etc/welcome.txt
-::respawn:/bin/cttyhack /bin/sh
-tty2::once:cat /etc/welcome.txt
-tty2::respawn:/bin/sh
-tty3::once:cat /etc/welcome.txt
-tty3::respawn:/bin/sh
-tty4::once:cat /etc/welcome.txt
-tty4::respawn:/bin/sh
-
-EOF
-
-cd ..
-
-# The '/init' script is the first place where we gain execution control after
-# the kernel has been loaded. This script prepares the core file systems, then
-# creates new mountpoint in RAM which we use as new root location and finally
-# the execution is passed to the script '/sbin/init' which in turn looks for
-# the configuration file '/etc/inittab'.
-cat > init << EOF
-#!/bin/sh
-
-echo "Welcome to \"Minimal Linux Live\" (/init)"
-
-# Let's mount all core file systems.
-/etc/prepare.sh
-
-# Now let's create new mountpoint in RAM and make it our new root location.
-exec /etc/switch.sh
-
-EOF
-
-chmod +x init
-
 # Copy all source files to '/src'. Note that the scripts won't work there.
 cp ../../*.sh src
 cp ../../.config src
 cp ../../*.txt src
-chmod +rx src/*.sh
-chmod +r src/.config
-chmod +r src/*.txt
+cp -r ../../08_generate_rootfs src
+cp -r ../../11_generate_iso src
+
+chmod -R +rx **/*.sh
+chmod -R +r **/.config
+chmod -R +r **/*.txt
 
 # Copy all necessary 'glibc' libraries to '/lib' BEGIN.
 
diff --git a/src/08_generate_rootfs/etc/bootscript.sh b/src/08_generate_rootfs/etc/bootscript.sh
new file mode 100755
index 000000000..cfca84333
--- /dev/null
+++ b/src/08_generate_rootfs/etc/bootscript.sh
@@ -0,0 +1,10 @@
+#!/bin/sh
+
+echo "Welcome to \"Minimal Linux Live\" (/sbin/init)"
+
+for DEVICE in /sys/class/net/* ; do
+  echo "Found network device ${DEVICE##*/}" 
+  ip link set ${DEVICE##*/} up
+  [ ${DEVICE##*/} != lo ] && udhcpc -b -i ${DEVICE##*/} -s /etc/rc.dhcp
+done
+
diff --git a/src/08_generate_rootfs/etc/inittab b/src/08_generate_rootfs/etc/inittab
new file mode 100644
index 000000000..d4fb0a548
--- /dev/null
+++ b/src/08_generate_rootfs/etc/inittab
@@ -0,0 +1,12 @@
+::sysinit:/etc/bootscript.sh
+::restart:/sbin/init
+::ctrlaltdel:/sbin/reboot
+::once:cat /etc/welcome.txt
+::respawn:/bin/cttyhack /bin/sh
+tty2::once:cat /etc/welcome.txt
+tty2::respawn:/bin/sh
+tty3::once:cat /etc/welcome.txt
+tty3::respawn:/bin/sh
+tty4::once:cat /etc/welcome.txt
+tty4::respawn:/bin/sh
+
diff --git a/src/08_generate_rootfs/etc/prepare.sh b/src/08_generate_rootfs/etc/prepare.sh
new file mode 100755
index 000000000..ce05206b5
--- /dev/null
+++ b/src/08_generate_rootfs/etc/prepare.sh
@@ -0,0 +1,9 @@
+#!/bin/sh
+
+dmesg -n 1
+
+mount -t devtmpfs none /dev
+mount -t proc none /proc
+mount -t tmpfs none /tmp -o mode=1777
+mount -t sysfs none /sys
+
diff --git a/src/08_generate_rootfs/etc/rc.dhcp b/src/08_generate_rootfs/etc/rc.dhcp
new file mode 100755
index 000000000..c2406d45b
--- /dev/null
+++ b/src/08_generate_rootfs/etc/rc.dhcp
@@ -0,0 +1,15 @@
+#!/bin/sh
+
+ip addr add $ip/$mask dev $interface
+
+if [ "$router" ]; then
+  ip route add default via $router dev $interface
+fi
+
+if [ "$ip" ]; then
+  echo "DHCP configuration for device $interface"
+  echo "ip:     $ip"
+  echo "mask:   $mask"
+  echo "router: $router"
+fi
+
diff --git a/src/08_generate_rootfs/etc/resolv.conf b/src/08_generate_rootfs/etc/resolv.conf
new file mode 100644
index 000000000..b86901ea2
--- /dev/null
+++ b/src/08_generate_rootfs/etc/resolv.conf
@@ -0,0 +1,3 @@
+nameserver 8.8.8.8
+nameserver 8.8.4.4
+
diff --git a/src/08_generate_rootfs/etc/switch.sh b/src/08_generate_rootfs/etc/switch.sh
new file mode 100755
index 000000000..a8983a81c
--- /dev/null
+++ b/src/08_generate_rootfs/etc/switch.sh
@@ -0,0 +1,149 @@
+#!/bin/sh
+
+# Create the new mountpoint in RAM.
+mount -t tmpfs none /mnt
+
+# Create folders for all critical file systems.
+echo "Create folders for all critical file systems..."
+mkdir /mnt/dev
+mkdir /mnt/sys
+mkdir /mnt/proc
+mkdir /mnt/tmp
+
+# Copy root folders in the new mountpoint.
+echo "Copying the root file system to /mnt..."
+cp -a bin etc lib lib64 root sbin src usr /mnt
+
+DEFAULT_OVERLAY_DIR="/tmp/minimal/overlay"
+DEFAULT_UPPER_DIR="/tmp/minimal/rootfs"
+DEFAULT_WORK_DIR="/tmp/minimal/work"
+
+echo "Searching available devices for overlay content..."
+for DEVICE in /dev/* ; do
+  DEV=$(echo "${DEVICE##*/}")
+  SYSDEV=$(echo "/sys/class/block/$DEV")
+
+  case $DEV in
+    *loop*) continue ;;
+  esac
+
+  if [ ! -d "$SYSDEV" ] ; then
+    continue
+  fi
+
+  mkdir -p /tmp/mnt/device
+  DEVICE_MNT=/tmp/mnt/device
+
+  OVERLAY_DIR=""
+  OVERLAY_MNT=""
+  UPPER_DIR=""
+  WORK_DIR=""
+
+  mount $DEVICE $DEVICE_MNT 2>/dev/null
+  if [ -d $DEVICE_MNT/minimal/rootfs ] && [ -d $DEVICE_MNT/minimal/work ] ; then
+    # folder
+    echo "  Found '/minimal' folder on device '$DEVICE'."
+    touch $DEVICE_MNT/minimal/rootfs/minimal.pid 2>/dev/null
+    if [ -f $DEVICE_MNT/minimal/rootfs/minimal.pid ] ; then
+      # read/write mode
+      echo "  Device '$DEVICE' is mounted in read/write mode."
+
+      rm -f $DEVICE_MNT/minimal/rootfs/minimal.pid
+
+      OVERLAY_DIR=$DEFAULT_OVERLAY_DIR
+      OVERLAY_MNT=$DEVICE_MNT
+      UPPER_DIR=$DEVICE_MNT/minimal/rootfs
+      WORK_DIR=$DEVICE_MNT/minimal/work
+    else
+      # read only mode
+      echo "  Device '$DEVICE' is mounted in read only mode."
+
+      OVERLAY_DIR=$DEVICE_MNT/minimal/rootfs
+      OVERLAY_MNT=$DEVICE_MNT
+      UPPER_DIR=$DEFAULT_UPPER_DIR
+      WORK_DIR=$DEFAULT_WORK_DIR
+    fi
+  elif [ -f $DEVICE_MNT/minimal.img ] ; then
+    #image
+    echo "  Found '/minimal.img' image on device '$DEVICE'."
+
+    mkdir -p /tmp/mnt/image
+    IMAGE_MNT=/tmp/mnt/image
+
+    LOOP_DEVICE=$(losetup -f)
+    losetup $LOOP_DEVICE $DEVICE_MNT/minimal.img
+
+    mount $LOOP_DEVICE $IMAGE_MNT
+    if [ -d $IMAGE_MNT/rootfs -a -d $IMAGE_MNT/work ] ; then
+      touch $IMAGE_MNT/rootfs/minimal.pid 2>/dev/null
+      if [ -f $IMAGE_MNT/rootfs/minimal.pid ] ; then
+        # read/write mode
+        echo "  Image '$DEVICE/minimal.img' is mounted in read/write mode."
+
+        rm -f $IMAGE_MNT/rootfs/minimal.pid
+
+        OVERLAY_DIR=$DEFAULT_OVERLAY_DIR
+        OVERLAY_MNT=$IMAGE_MNT
+        UPPER_DIR=$IMAGE_MNT/rootfs
+        WORK_DIR=$IMAGE_MNT/work
+      else
+        # read only mode
+        echo "  Image '$DEVICE/minimal.img' is mounted in read only mode."
+
+        OVERLAY_DIR=$IMAGE_MNT/rootfs
+        OVERLAY_MNT=$IMAGE_MNT
+        UPPER_DIR=$DEFAULT_UPPER_DIR
+        WORK_DIR=$DEFAULT_WORK_DIR
+      fi
+    else
+      umount $IMAGE_MNT
+      rm -rf $IMAGE_MNT
+    fi
+  fi
+
+  if [ "$OVERLAY_DIR" != "" -a "$UPPER_DIR" != "" -a "$WORK_DIR" != "" ] ; then
+    mkdir -p $OVERLAY_DIR
+    mkdir -p $UPPER_DIR
+    mkdir -p $WORK_DIR
+
+    mount -t overlay -o lowerdir=/mnt:$OVERLAY_DIR,upperdir=$UPPER_DIR,workdir=$WORK_DIR none /mnt 2>/dev/null
+
+    OUT=$?
+    if [ ! "$OUT" = "0" ] ; then
+      echo "  Mount failed (probably on vfat)."
+      
+      umount $OVERLAY_MNT 2>/dev/null
+      rmdir $OVERLAY_MNT 2>/dev/null
+      
+      rmdir $DEFAULT_OVERLAY_DIR 2>/dev/null
+      rmdir $DEFAULT_UPPER_DIR 2>/dev/null
+      rmdir $DEFAULT_WORK_DIR 2>/dev/null
+      
+    else
+      # All done, time to go.
+      echo "  Overlay data from device '$DEVICE' has been merged."
+      break
+    fi
+  else
+    echo "  Device '$DEVICE' has no proper overlay structure."
+  fi
+
+  umount $DEVICE_MNT 2>/dev/null
+  rm -rf $DEVICE_MNT 2>/dev/null
+done
+
+# Move critical file systems to the new mountpoint.
+echo "Remounting /dev, /sys, /tmp and /proc in /mnt..."
+mount --move /dev /mnt/dev
+mount --move /sys /mnt/sys
+mount --move /proc /mnt/proc
+mount --move /tmp /mnt/tmp
+
+# The new mountpoint becomes file system root. All original root folders are
+# deleted automatically as part of the command execution. The '/sbin/init' 
+# process is invoked and it becomes the new PID 1 parent process.
+exec switch_root /mnt /sbin/init
+
+echo "You can never see this... unless there is a serious bug..."
+sleep 99999
+
diff --git a/src/08_generate_rootfs/etc/welcome.txt b/src/08_generate_rootfs/etc/welcome.txt
new file mode 100644
index 000000000..37042c691
--- /dev/null
+++ b/src/08_generate_rootfs/etc/welcome.txt
@@ -0,0 +1,7 @@
+
+  #####################################
+  #                                   #
+  #  Welcome to "Minimal Linux Live"  #
+  #                                   #
+  #####################################
+
diff --git a/src/08_generate_rootfs/init b/src/08_generate_rootfs/init
new file mode 100755
index 000000000..6dcaf2a62
--- /dev/null
+++ b/src/08_generate_rootfs/init
@@ -0,0 +1,10 @@
+#!/bin/sh
+
+echo "Welcome to \"Minimal Linux Live\" (/init)"
+
+# Let's mount all core file systems.
+/etc/prepare.sh
+
+# Now let's create new mountpoint in RAM and make it our new root location.
+exec /etc/switch.sh
+
diff --git a/src/11_generate_iso.sh b/src/11_generate_iso.sh
index 7e9b35f73..4f81602d6 100755
--- a/src/11_generate_iso.sh
+++ b/src/11_generate_iso.sh
@@ -1,5 +1,7 @@
 #!/bin/sh
 
+SRC_DIR=$(pwd)
+
 # Find the kernel build directory.
 cd work/kernel
 cd $(ls -d *)
@@ -41,19 +43,67 @@ chmod +rx src/*.sh
 chmod +r src/.config
 chmod +r src/*.txt
 
+# Read the 'OVERLAY_TYPE' property from '.config'
+OVERLAY_TYPE="$(grep -i OVERLAY_TYPE $SRC_DIR/.config | cut -f2 -d'=')"
+if [ "$OVERLAY_TYPE" = "sparse" -a "$(id -u)" = "0" ] ; then
+  # sparse
+  
+  echo "Using sparse file for overlay."
+  
+  # This is the BusyBox executable.
+  BUSYBOX=../rootfs/bin/busybox  
+  
+  # Create sparse image file with 1MB size.
+  $BUSYBOX truncate -s 1M minimal.img
+  
+  # Find available loop device.
+  LOOP_DEVICE=$($BUSYBOX losetup -f)
+  
+  # Associate loop device with the sparse image file.
+  $BUSYBOX losetup $LOOP_DEVICE minimal.img
+  
+  # Format the sparse image file with Ext2 file system. 
+  $BUSYBOX mkfs.ext2 $LOOP_DEVICE
+  
+  # Mount the sparse file in folder 'tmp_min".
+  mkdir tmp_min
+  $BUSYBOX mount minimal.img tmp_min
+  
+  # Create the overlay folders.
+  mkdir -p tmp_min/rootfs
+  mkdir -p tmp_min/work
+  
+  # Copy the overlay content.
+  cp -r $SRC_DIR/11_generate_iso/* tmp_min/rootfs/
+  
+  # Unmount the sparse file and thelete the temporary folder.
+  $BUSYBOX umount tmp_min
+  rm -rf tmp_min
+  
+  # Detach the loop device.
+  $BUSYBOX losetup -d $LOOP_DEVICE
+elif [ "$OVERLAY_TYPE" = "folder" ] ; then
+  # folder
+  echo "Using folder structure for overlay."
+  mkdir -p minimal/rootfs
+  mkdir -p minimal/work
+  
+  cp -r $SRC_DIR/11_generate_iso/* minimal/rootfs/
+fi
+
 # Create the overlay directory '/minimal/rootfs'. All files in this folder are
 # merged in the root folder and can be manipulated thanks to overlayfs.
-mkdir -p minimal/rootfs
-cd minimal/rootfs
-echo 'Sample file 1 from CD.' > file_from_cd_1.txt
-echo 'Sample file 2 from CD.' > file_from_cd_2.txt
-cd ../..
+#mkdir -p minimal/rootfs
+#cd minimal/rootfs
+#echo 'Sample file 1 from CD.' > file_from_cd_1.txt
+#echo 'Sample file 2 from CD.' > file_from_cd_2.txt
+#cd ../..
 
 # Create ISOLINUX configuration file.
 echo 'default kernel.bz  initrd=rootfs.gz' > ./isolinux.cfg
 
 # Now we generate the ISO image file.
-genisoimage -J -r -o ../minimal_linux_live.iso -b isolinux.bin -c boot.cat -no-emul-boot -boot-load-size 4 -boot-info-table ./
+genisoimage -J -r -o ../minimal_linux_live.iso -b isolinux.bin -c boot.cat -input-charset UTF-8 -no-emul-boot -boot-load-size 4 -boot-info-table ./
 
 # This allows the ISO image to be bootable if it is burned on USB flash drive.
 isohybrid ../minimal_linux_live.iso 2>/dev/null || true
diff --git a/src/11_generate_iso/README.txt b/src/11_generate_iso/README.txt
new file mode 100644
index 000000000..69b95e66e
--- /dev/null
+++ b/src/11_generate_iso/README.txt
@@ -0,0 +1,7 @@
+
+This file is located in directory '11_generate_iso'. You can use this directory
+to put your own content (files and folders) which will be visible in the root
+directory of your 'Minimal Linux Live' system, just like this file is visible.
+The files/folders will override the content in the root folder, so be careful
+what you put there because you may end up with broken system. :)
+
diff --git a/src/qemu32.sh b/src/qemu32.sh
index aae299241..14385e6a4 100755
--- a/src/qemu32.sh
+++ b/src/qemu32.sh
@@ -1,4 +1,5 @@
 #!/bin/sh
 
-qemu-system-i386 -m 64M -hda hdd.img -cdrom minimal_linux_live.iso -boot d
+qemu-system-i386 -m 64M -cdrom minimal_linux_live.iso -boot d
+#qemu-system-i386 -m 64M -hda hdd.img -cdrom minimal_linux_live.iso -boot d