I moved the boot options line to the kernel line of menu.lst and all worked.
I retained the subdirectory in the path pointed to.
This is my working current menu.lst entry for a frugal install to a subdirectory.
You can use it as a template changing the drive and subdirectory as needed.
# Linux bootable partition config begins
title Tiny Core Linux .9
root (hd0,0)
kernel /tce/bzImage quiet tce=hda1/tce restore=hda1/tce
initrd /tce/tinycore.gz
# Linux bootable partition config ends
Hope that this may help others doing a frugal install.