Sorry to dig up an old thread, but I've had similar issues and can contribute extra info to this.
My self built system used to have one old IDE DVD Burner and an ASUS SATA DVD Burner. Both drives worked fine in XP, Vista Ultime, and Vista Ultimate x64. When I replaced Vista with 7 RC1, I noticed that while the IDE drive shows up in My Computer, I can't read any discs at all. I tried deleteing the UpperLimits/LowerLimits reg key, and tried updating the firmware via the Pioneer support website, with no difference.
I recently upgraded HDDs and needed to reinstall Windows 7. I also added a new Samsung SATA DVD burner in case the IDE one was faulty. So I've got 3 Burners installed now.
I lost my old RC1 disc so I downloaded it again and burnt it to DVD, and tried to boot from it in the IDE drive, to see if it really was dead. The DVD booted ok, up until the point where I received the same error as mentioned above. I took the disc out of the IDE drive and stuck it in one of the SATA drives and setup continued fine without a hitch.
That said, I have installed RC1 from the same old disc on an older PC which also uses IDE and that drive worked fine, so I'm not too sure what's going on. Hopefully it's just a bug that has been fixed in the RTM version.
If anyone else is stuck with this but doesn't have another DVD drive, they could search Google for the steps to use a USB thumb drive to install Windows 7/Vista.