I'd like to add Alcohol 120% to replace Daemon-Tools. It's using the same code and does more. Only it's not FREE like Daemon-Tools.
Edit - Sorry I didn't see before that war59312 already posted about Alcohol 120%. I'll add that one of the BIG differences between Daemon and Alcohol is that you can mount more than fake CD-ROM drives at the sametime
Want more information about it, go here:
http://www.alcohol-soft.com/index.php?page=product