The process is basically the way you explained it. The account is actually called a "self directed 401k". It can be setup by a number of companies that you can find online but you can also go to some one like Scott and Stringfellow, JD Edwards or the like to get detailed advice on the process.

People usually use this to purchase land/buidlings then the leasing/rental income generates a return for your 401k account but it can be used for other purposes.

Like I said an investment professional can give you more details on this. Try talking with your bank they usually own an investment company these days and they can put you intouch with someone that can give you the details and limitations.