Building a fedora28 aarch64 FDI on aarch64 system running the same fedora28 did not produce any new results and still fails. Since this seems like a bug to me, I’ve submitted one - https://bugzilla.redhat.com/show_bug.cgi?id=1641868
Meanwhile, I’ll try dracut method you described in [1] before I fallback to [2], which involves actual squashfs build.
[1] - Booting Discovery over HTTP
[2] - https://help.ubuntu.com/community/LiveCDCustomizationFromScratch
Thanks!