Oops, I meant to say recovery mode. At any rate, the installation went very smoothly. Updated to OFW 3.55 from OFW 3.41, then proceeded to update to kmeaw 3.55 via recovery mode and had no problems at all. Installed latest version of MutiMAN then installed the BDEMU-355KM.pkg, and was able to load up my recently backed up copy of KZ3. Had no problems at all, game ran just as smoothly as on a BD.
Very impressive. MutiMAN FTW! The whole layout of the program is very professional and amazingly streamlined too, even the music is a neat touch. Also nice that I don't need a disk in the drive to play a game, since the App/PS3 GAME folder thing works as the games launch point. And I didn't even get prompted to update my FW when launching KZ3 (which I assume it normally would have done if launched from the BD).
But I am curious, is it possible for Sony to eventually stop future games from being backed up like this? Or is this something that Sony can't stop as long as you are on CFW with the proper backup program?