Ok finally figured this out. First off, you need to find the correct drivers. This became relatively easy for me as I am deploying about 50 HP 8300's and the hp site has the winpe driver pack.
Next I was creating a bootable ufd. Here is a very good guide http://technet.microsoft.com/en-us/library/cc766092%28v=ws.10%29.aspx . HOWEVER there is an instruction omitted as one user points out in the comments:
The instructions in step two leave out one important step.
The sources directory must have a boot.wim file.
Here is the command:
xcopy c:\winpe_x86\winpe.wim c:\winpe_x86\iso\sources\boot.wim /y
The you need to mount the image file as shown here http://www.windows-noob.com/forums/index.php?/topic/2349-guide-adding-drivers-to-a-custom-winpe-30/. After mounting the image, you can add the drivers, then when you are ready commit the image.
Finally you should copy the files to another directory OR directly to your USB drive.
xcopy c:\winpe_x86\iso\*.* /s /e /f f:\
How did I know it was finally going to work? Generally if you boot a standard windows PE UFD, if will load wpeinit immediately - this time is took some time to wpeinit so I knew it was loading all drivers. I typed ipconfig and it showed me that I had an ip address.
I think ONE of the places I was really missing the boat was when I was mounting the image, I was pointing to the incorrect wim file. So I WAS injecting drivers to A wim file, just not the correct one. Be sure you are mounting the wim file in sources\iso folder of the original winpe files.
Another this I realized was it didn't seem to matter if I threw 10 network drivers at it - basically if the correct drivers were there it will load it. Through trial and error I started wondering that if I had the wrong drivers was it failing the first one and not attempting to load any others. This does not seem to be the case as my working UFD has several different network drivers.
I really this helps someone because I have spent far too much time trying to get it right.