http://www.kickstarter.com/projects/elegantinvention/isostick-the-optical-drive-in-a-usb-stick
The concept is definitely viable, since Sandisk did something very similar in their Cruzer line of products, except you can’t update the contents of the fake CD-ROM drive yourself on a Cruzer.
I’m buying one!
-Adam Thompson
(204) 291-7950 - direct
(204) 489-6515 - fax