.exe inside a .exe

It's possible, and just a little bit tricky. You can basically stick anything you want on the end of an EXE file if you do it right. I usually pad the first EXE with null characters (byte 0) until the file is an even multiple of 24KB. After the padding I add the second EXE. In the first EXE's code, I will know how many multiples of 24KB the padding is, so I can hardcode the starting position of the second EXE and extract the file with normal file I/O routines.

The easiest way to run the code would be to extract the second EXE into a temporary file, and run that will ShellExecute(). When it's done you can just delete the temp file.

Well, you could store an exe as a resource, which you could then extract and execute (you would have to actually write it back to a file). The exe would just be a standalone program though, not part of your program.