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I guess PE will be a lot easier. Since I will need to use relocation and code modification later on.

Now I am using Watcom C/C++ 11.0c and NASM and the Watcom linker I belive can do PE. Will I need to patch the executeable?

What about a bootloader? How does one go about implementing that?

http://www.osdev.org/osfaq2/index.php/Visual%20C
There you can see some things consernig PE format and how bootloader can treat it!