How can I add a GRUB2 menu entry to boot from my cd drive? Would I have to chainload it, or is there another way of doing it?
GRUB2 itself doesn't have support to boot from CD, but it supports booting from ISO files. You could copy the ISO of the CD you want to boot from, to the hard drive and then create a custom grub entry.
Now with Grub, they say its might be possible. This method is applicable for all legacy PCs which can’t boot from CDROM drive. It requires the use of memdisk.bin, and sbootmgr.dsk. For instructions, see Boot CDROM through GRUB.
The links to download sbootmgr, and memdisk no longer works. But you can download them by clicking on their respective links.