I am facing the similar issue while attempting to PXE boot Ubuntu 16.04 LTS 
version over corporate Network
This looks like a 100% bug because I followed the exact same steps as Ubuntu 
14.x and 15.x however earlier versions PXE install
smoothly whereas Ubuntu 16.04 LTS version errors out saying "installation error 
ocurred" and logs show live installer image not found , Can't open 
/usr/lib/fetch-url//cdromhttp

As you can see its prefixing cdrom which should not happen. I have spent
hours testing and finding workarounds for this however this seems like a
bug in the code. Request you to fix this. We are currently doing a POC
on 16.04 LTS and if everything goes successfully, we may need to mass
deploy this in our environment. We can't be deploying using CDROM on
every machine and need to a mechanism where PXE via netboot works
smoothly

Request the developers to have a look at this and come up with a patch
or fix for this.

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https://bugs.launchpad.net/bugs/1575652

Title:
  PXE install prefixes /cdrom to squashfs location, fails to find it

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