I've managed to get it working!! Yay!!
By using compatibility mode it seems to work now, the intro movies look a little weird but who cares
Mount the 8MB image with Daemon Tools (the small one doesn't work for me)
Go to the install folder, right click on the wsc2005.exe, go to the compatibility tab and choose Win98 and apply. No more CD
This is obviously for WinXP users
Many thanks to the other peeps who tried to help out!!