Hmm... well, I try to run most stuff in VMs to reduce impact on my main system. This is how I know my Virtual Machines can read and write discs on the drive, but the host can only write, or read as raw, not recognize the file system and browse it.
I'm not sure what might load drivers to that device and not to Daemon Tools virtual SCSI devices, or why that should allow raw device access only.
Nero Burning ROM 7 has been on the system since I got it, (Updated it to Ultra, but some time before this started happening) and there is a program which handles the Remote Control which comes with it's own equivalent of Media Center... which I never use because it isn't as good as media center, but I can't install the Remote Control driver without it. (why do people do that, it's so annoying.) Again, that has been there since the system was first set up, it's part of the initial OEM setup.
From the rest of the list, I don't think I have anything like that. I do have WinISO and ISORecorder3 installed to manipulate ISO images and make ISOs graphically from files and folders.
I have CloneCD, CloneDVD and AnyDVD in a VM all of their own, and they work fine from there.
I can't think why I would want Alcohol as well as Daemon Tools, and I prefer Daemon. Even so, it creates a virtual SCSI bus, it doesn't affect the existing bus or file systems. Maybe some versions of Alcohol allow creating disc images, but that's outside the remit of Daemon... (which would partly explain why I prefer it, there is such a thing as too much functionality.)
The thing which really gets me is that I can recognize ISO9660 from a virtual disc, but not a real one. And I can access raw blocks from a real disc, and write to a real disc... but not browse one.
It's like the FileSystem Recognizer has become disconnected from that device, and that device only. So it doesn't even bother to see if it can read a filesystem from any disc I insert.
Other than some hellish registry corruption, I can't think what could do that.
8X-------------------------------------------------------------------
Edit:
I found the solution. I thought back to what I would have done in the NT4/9x days. Found the Device Manager under Manage My Computer and uninstalled the physical device.
After a reboot and relog Vista found a new device (the DVD Writer I just uninstalled) set it up, and now it works as expected again.
I'm still none the wiser as to what caused this in the first place, but I presume something (quite possibly some CD copy protection that isn't Vista compatible, even though the program still works) has made a mess of the HKLM\SYSTEM\CurrentControlSet, which I hope we all know not to mess about with manually.

It houses (among other things, and in quite an illegible way) the layout of the Windows System Object Namespace, as viewable with Mark Rasanovichs' fantastic
WinObj.
This associates filesystems and filesystem recognizers with devices named pipes, streams, junctions, aliases (substitutions) and reparse points.
It's a lot like /dev and mountlist (/etc/fstab) on unix systems rolled up into something much more object oriented. This is more manageable programatically, but less transparent for power users. (not that automount is exactly transparent)
Anyway, uninstalling the device and filesystem associations, must have removed any and all of those links. Letting it rediscover and install the device again set them back up as they should have been in the first place without me having to get my hands
too dirty.
If I ever see anyone with something similar, I will recommend this course of action immediately.
