Internal Index Error (Virtual CD Error Code 1000)
I have revisited your suggestion of the KB article and it doesn't help at all! I had tried the suggestions prior to requesting help.
I have now rebuilt a PC with a clean install of Windows 7 Professional without the machine being connected to our network. I then installed Virtual CD 10.1.0.7, not changing any of installation settings. I added a virtual drive, created a virtual CD and when I tried to load it the error occured again!
Just to rule out your previous suggestion, using Wordpad I saved a file into the default folder, read it and deleted it.
I believe the above rules out the NMS server and network permissions, which was never the case as our XP Professional and Vista Business PC's all work as expected.