Hey Ivan, as far as I can tell from the limited BIOS (I hate laptop BIOSes) I have two IDE channels: Primary (HDD and CD-ROM) and Secondary (Floppy). I think the CD-ROM is the slave on the Primary channel.
Warpcafe, I have updated the Compaq BIOS as per your ROMPAQ and I've also tried to update the Keyboard Controller/Battery Firmware update as listed in the Windows ME update section for the Presario 1240, but apparently I've done it as it says it does not need the update.
I've taken the DANIATAP.FLT and DANIS506.ADD from my 1.2mr install (currently working on the Presario 1240) and put them onto a floppy labeled BOOT_UPDATE in the root as described per the Online Instructions on the installer CD. I specified DANIS506 for the pre-boot menu from the floppy and it got the installer past the splash screen but it still could not find the CD-ROM. Should I have specified DANIATAP instead?
I have not tried the other CD drivers yet as I used the standard OS2CDROM driver for the 1.2mr install and I assume it has not changed since then. I have however, updated the 1.2mr install with many of the packages from 2.0RC6a and many of the .dll and .exe files so it is a hybrid thing now. It boots so I guess I have not broken anything

Now what I desperately need is for GenMac packages which have support for my Microsoft MN-720 (Dell 1350), Broadcom chipset. eCS 1.2mr does NOT work with my USB stuff unless I get all the USB updates and that is a pain in the ass over floppies so network first.
Thanks guys!