It's not a show stopper but I don't think it's supposed to happen this way. 
  I'm working in /root/livecd and installing the core package group into a 
subdirectory called 'live' with the either commands.  Both produce the same 
outcome.

yum --installroot=/root/livecd/live install ...

yum -c live/etc/yum.conf --installroot=/root/livecd/live install ...

The directory is first prep'ed following Urs Beyerle's instructions on 
making live cds.  The install works fine but it creates

/root/livecd/live/root/livecd/live/var/lib/yum

and writes a file called transaction-all.xxxxxxxx there.  Note the directory 
path which repeats the current working directory.  I would have thought the 
installroot option would reorient yum so whatever it does is relative to the 
install root, ie, the transaction file is written to

/root/livecd/live/var/lib/yum

instead of remembering where it was working from.