Custom boot ISO with latest patches applied

I have the concept on how to download the latest RHEL 7.x ISO, and create my own custom boot ISO with a kickstart (ks.cfg) file. I need to know how to apply the latest package updates into the ISO. I tried just doing a copy of the latest packages to the Package directory, but the boot loader formats the disk, then fails on loading any of the packages (see attached screenshot).

Does anyone have any insight on what steps I need to perform to get this to work?