FYI - just installed the latest version of SlySoft's Virtual Clone drive on Win 2008 R2. Fully working without a reboot in just a few seconds! I've been using VCD for years without any issues and greatly prefer it over magiciso or daemontools (which I do have installed and in use on a few servers). - Jeremy
Edit: Neglected to read your can't reboot note. I believe this uses a kernel mode driver so a reboot would be required. You can use WinRar to extract the ISO image to a folder and install from that folder if so required.
In addition to what @Wayne said, someone may also be interested to know that SlySoft's Virtual CloneDrive product also works on Windows Server 2008 R2 Core installation. I just used it to install the SP1 patch.
b37509886e