Ok, based on all the information you've given:
You cannot run a "full version" of Windows 7 on a DVD. 1, a full install is too big and, 2, a full version of windows needs to be able to write to it's source, and so a DVD will not work.
If it is completely impossible to boot from a USB disk, and a full install of Windows 7 via DVD is out, you are much more limited in your options, but at least you now have a better idea of what you can and cannot do.
There are Live CD's of Linux and Windows, but if your needs are for .Net and Mono (a Linux-compatible implementation of .Net) will not work, then you need Windows.
Once again, the assumptions are:
- There is no possible way to boot to a USB drive.
- You need .Net and not Mono or any alternatives.
- Windows will not run as a full install from a DVD, both for space and for needing a writable "base" media.
So the only option then is a Live Windows disk with preinstalled .Net components.
If Windows XP is an option, it is a lot easier to fit onto a disk, and .Net (up to Runtime 4 I believe) will run on it and can be installed as part of the Live disk setup. Try PE Builder if this option will work for you: http://www.instantfundas.com/2007/11/how-to-create-windows-xp-live-cd.html
I cannot find an option for Windows 7 live that explicitly states it allows .Net function. Though Windows 7 has .Net implemented by default, so unless it's a specific .Net toolset not included by default, you may find it'll work without needing anything special.
Here's another possibility:
http://www.hanselman.com/blog/GuideToInstallingAndBootingWindows8DeveloperPreviewOffAVHDVirtualHardDisk.aspx
These are instructions on how to boot from a VHD, or Virtual Hard Disk, such as the Windows 8 Developer Preview. Creating a Windows 7 VHD shouldn't be too hard and it should work with your licensing strictures.
If you've got a large enough USB drive, this may be a way around the problems booting from USB. It looks like you could replace the booting from USB steps with booting from a disk, and then mount the VHD stored in the USB drive at the appropriate point in the setup process.
Note that a live image and a full install are not the same. So a full live CD is a bit of an oxymoron. – jiggunjer – 2015-12-30T05:00:57.880
What are the specific reasons PE-type tools will not work or that a full Windows 7 install is required? – music2myear – 2012-02-21T20:01:56.437
a PE instance would work from a technical point of view, but there are legal reasons that necessitate avoiding it, that I can't get into – jglouie – 2012-02-21T20:13:22.900
Ok. What about using a Live disk of Linux? Do those same legal issues preclude this option? – music2myear – 2012-02-21T20:15:18.480
Is it full Linux on the live disk or a partial? – jglouie – 2012-02-21T20:17:57.030
Many Linux distributions run a full system via Live CD which is also used as their very friendly installation system, even to the point of installing and updating things. Though, of course, rebooting makes the whole thing go back to it's "original" state. – music2myear – 2012-02-21T20:21:36.990
Can you please specify the reason why you need a Win 7 PE as opposed to using one of the many live distributions of linux? Maybe we can convince you otherwise. Also, not all live distributions are cleared on reboot. Many of them have ways of making your changes persistent. – TheEmpireNeverEnded – 2012-02-21T20:35:03.510
@TheEmpireNeverEnded It's tough to explain -- but generically, there's a need to run the latest .Net software along with win32 tools. – jglouie – 2012-02-21T20:37:50.830
@LemonBeagle, Is there a need to interact directly with OSes already installed on the machine you're booting the PE from, or do you just need a portable workplace? – TheEmpireNeverEnded – 2012-02-21T20:45:50.413
@TheEmpireNeverEnded Yes, there's a need to operate on data from other drives – jglouie – 2012-02-21T20:57:21.287
Virtual Machine on a bootable linux? Abstracting the hardware would bypass the obvious issues with the underlying hardware changing from computer to computer. – horatio – 2012-02-21T20:58:00.303
@horatio beat me to it. I was going to recommend the same thing. Operating on data on the drives may be a bit tricky from within a VM, though. – TheEmpireNeverEnded – 2012-02-21T20:59:19.847
There are many reasons why a PE would not work. E.g. most firmware upgrade will not run on PE because it does not have all the components required. AFAIK no Dell/HP firmware upgrade can be successfully performanced under PE... It's lame that some vendors provide firmware upgrade packages only for Windows. – sdaffa23fdsf – 2012-08-24T04:23:11.003