You receive the error “A required CD/DVD device driver is missing” when installing Windows 7 or Windows 2008/R2 from a USB device. Furthermore if you browse to install drivers you will see that your CD/DVD drive is actually installed successfully.
You are using a USB 3 Port
The error is very misleading; the problem is not that the CD/DVD device drivers are missing, it is that USB 3 drivers are missing. Most likely you have plugged your USB drive into a USB 3 port but the problem here is that Windows 7/2008/R2 doesn’t ship with USB 3 support. The solution is very simple; just plug your USB drive into a USB 2 port and start the install again.
Why does this happen?
The initial boot up will work fine but once Windows starts installing drivers it will fail for the USB 3 hardware. At this point the installation can no longer see the USB pen resulting in the error. By booting up on a USB 2 port Windows has the required drivers to continue the installation successfully. As for the “A required CD/DVD device driver is missing” error I can only guess this is because the install expects to be installed from the CD/DVD drive. Once it can’t load the drivers for the USB device it is as if the CD/DVD drive has disappeared resulting in the “A required CD/DVD device driver is missing” error.