To setup a virtual CD drive you will have to have Daemon tools or softwares like Poweriso.
Daemon tools are free though. In poweriso you can have a virtual drive by using poweriso virtual drive manager. Open it and it will dock at the system tray. Right click the icon in the system tray and select “Set no of drives”, as many as you want up to 9.Now right click again and select “mount image to drive “ and then browse to the location of the iso image file or a Nero image file.
Now the image file will be loaded as if it has been written to a disc and it will auto play and , here you go , a virtual CD drive. You can try out a similar process using daemon tools. Daemon tools are free and very good.