Take this as a proof of concept. New update (a native one) will change everything.
Btw:
1. The 486 emulation engine I have been working on is intended for DOS game emulation. It happens to be fast enough to run TeX, although it is at least ten times slower than the native version.
2. Next time, don't pretend to be a customer in the email. Be clear that you are a developer (working on TeX apps), I'll be more open to your questions.
The disk image is formatted with "/S" option. I am not sure if that counts as shipping DOS.
They may be small, but they since pack the core functionality of MS-DOS, I don't know if a fair use defense would fly...
You should also distribute the source of the BIOS with the app (because Apple is the distributor, not you).
Otherwise, very cool project. Is your x86 emulator available somewhere? What will differentiate it from DOSBox?
The emulator only runs on ARM cpu(at present works only for jailbroken iPad/iPhone). You can download it (free) at www.aemula.net/download.html
This is much less than DOSBox in terms of features, but when it runs, it runs fast.
Do you have a license that states you can ship those "essential" files? If not, then all you have is a copyright statement, which effectively forbids redistribution.
MS DOS Version 6 (C)Copyright 1981-1994 Microsoft Corp
Licensed Material - Property of Microsoft All rights reserved.Another option would be to implement the DOS API (INT 21h and friends) in your emulation code, instead of within the VM as x86 code. DOSBox does this (but its emulation code would be under the GPL). DOSCMD also appears to do this and is under the BSD license: http://sourceforge.net/projects/doscmd/