The instructions are really incredibly simple:
Taken from http://www.petri.co.il/use-iso-image-files-vmware.htm:
To mount an ISO file in VMware
Workstation or Server, go to your
existing Virtual Machine. Double-click
on the CD-ROM drive like this:
Or, inside VMware, go to VM ->
Settings and click on CD/DVD drive.
Here, you will seen the "Connection"
properties for this device. By
default, you are probably using the
"physical driver". To change that and
use a disk image, click on Use ISO
Image, like this:
Click Browse, browse to the name of
your .ISO file, and click Open.
This will fill in the path to your ISO
file, like this:
Now, click Connect at power on and OK.
At this point the ISO is ready for use
by the OS. This demonstration was done
with the VM not running but this
operation can be performed on VMs
while they are running (just like you
would taking a CD/DVD in and out of
the CD/DVD drive on your PC).
Here, you can see that the mounting
As you can see, this Windows Server
has a CD drive mounted, even though it
has no physical CD/DVD drive. From
here, I could install operating system
upgrades or additional features.
To use a physical disc instead of an ISO, check the option for "Use physical drive".