Microsoft has produced a small system driver called the Virtual CD-ROM Control Panel for Windows XP, which you can download for free from MS Downloads.
THIS TOOL IS UNSUPPORTED BY MICROSOFT PRODUCT SUPPORT SERVICES
Copy VCdRom.sys to your %systemroot%\system32\drivers folder.
Click "Driver control"
If Install Driver button is available, click it. Navigate to the %systemroot%\system32\drivers folder, select VCdRom.sys, and click Open.
Click Add Drive to add a drive to the drive list. Ensure that the drive added is not a local drive. If it is, continue to click "Add Drive" until an unused drive letter is available.
Select an unused drive letter from the drive list and click Mount.
Navigate to the image file, select it, and click OK. UNC naming conventions should not be used, however mapped network drives should be OK. You may now use the drive letter as if it were a local CD-ROM device. When you are finished you may unmount, stop, and remove the driver from memory using the driver control.