Got it!
It was a problem with the amount of memory i had in the VM... It should be more than 256mb for a graphical install...
pxeconfig:
label co52_g kernel co52/vmlinuz rhgb append initrd=co52/initrd.img ramdisk_size=8192 ip=dhcp method=http://192.168.0.11/mrepo/centos5-i386/disc1 lang=en_US keymap=us
mrepo exports the full centos stuff and also the separate isos. If you point the method to the folder holding the contents of disc1 it works...
...