It's impossible to edit files in the i386 directory, since they are physically on the (readonly) ISO you supplied. You can use a tool to edit the iso file or do it without editing it and 'redirect' the requests to another directory:
You'll have to copy the txtsetup.inf file to the WINXP_EXTRA directory, edit it there and supply a proper mapping in the tftp configuration, something like:
rgi /WI2K3/i386/txtsetup.in_ /WI2K3_EXTRA/NONEXISTENT
rgi /WI2K3/i386/txtsetup.inf /WI2K3_EXTRA/TXTSETUP.INF
And remember to restart the tftp server as well, either from the web-interface of with
/etc/init.d/tftpd restart
I have not tried using other MSD's yet with the UDA, but I think that you may need to put the .inf file in the WI2K3_INF directory as well, and remember to restart the binl service!
/etc/init.d/binl restart
Good luck and let me know what happened!