How much computer experience do you have? When I get a laptop in my shop I usually take the hard drive out and use a special plug I have that allows me to plug the hard drive into my desktop computer and retrieve the data. Unfortunatly, If you do not have much experience with computers or laptops it's kind of out of the picture for now. The other option would be to download a copy of Knoppix (free Linux live on cd), burn it on a cd, and put it in your cd rom drive. Then boot the machine and you should be able to see any files on your hard drive and possibly back them up to a thumbdrive or some other means of media. It could also be that you corrupted a file when you removed the virtual CD drive Daemon Tools, Can you boot the laptop into safe mode? To do this, turn the machine completly off, turn it back on, at the windows xp screen press the F8 button. There is also an option to "restore windows to the last known working configuration" which would restore windows to the last configuration that worked. These are the only options I can think of right now short of doing a full reload/restore of windows. Good Luck.

Viperman,
I have one of those adapters but I am not sure which is pin #1 on these drives. I have three drives and not one shows which pin is #1.

Is pin #1 towards the "Jumpers" or away from the jumpers..

Examples...
Drive info.. Toshiba hdd2731
Drive info.. IBM DARA 209000

My adapter is keyed so I can not plug it in backwards. I Believe though, that pin one does go towards the jumpers.

DaMoogle - How old is your laptop? Is it under warrenty? My thinking would be to send it back to them and see if they could do it. Unfortunatly if it's not it would probably cost a lot of money. Even if they did restore windows, I highly doubt that they would get your data of your hard drive which still leaves you with a problem.