I love Daemon Tools and would put it above all other virtual cd applications. However I think you guys should look at the possibility of supporting file types that are not traditionally used as cd image files (e.g. .zip, .rar, vhd, etc.)
There's an application called WinMount that is moving in this direction. It's no where near as nice as Daemon Tools but I think the developer has some interesting ideas. Take a look.
http://www.winmount.com/