I like to keep my entire software library on a portable hard drive in ISO format. This allows me to take my entire library with me, prevents wear-and-tear on the original media, and allows for faster installs. My preferred application for mounting ISO files is Alcohol 120%.
Alcohol 120%, as well as its competitor Daemon Tools, use an SPTD driver by DuplexSecure. This SPTD driver currently does not function with Windows 7. Thus, you are unable to install Alcohol 120% or Daemon Tools on Windows 7.
While these tools do not yet support Windows 7, there are some other (although less mature) programs which do work. Pismo File Mount allows you to mount Zip, ISO, and CISO formats. It is free software and works with Windows 7. You can download Pismo File Mount directly from their web site at: http://www.pismotechnic.com/pfm/
Another tool you might consider is SlySoft Virtual CloneDrive. This software also appears to work with Windows 7 and supports mounting of ISO, BIN, and CCD formats. You can download Virtual Clone Drive directly from their web site at: http://www.slysoft.com/en/virtual-clonedrive.html