According to Johnny:

when using RPM to install centos-release initially ... use the --root
function like this:

rpm -ivh --root $LIVE centos-release

This trick, immediately followed by the "yum -c $LIVE/etc/yum.conf --installroot=$LIVE install yum" stanza, seems to work for me on an up-to-date Centos 4.3 system. I am still in the process of yumming the rest of the system in...
Thank you lots everyone

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Eduardo Grosclaude
Universidad Nacional del Comahue
Neuquen, Argentina