Hmmm my recollection was that the game searched through available "optical" drives looking for the disc. I don't think there is any setting that locks it to the install drive.
You mounted the ISO with Daemon tools to a drive letter, right?

Long system spec sig follows:






PowerSpec G436
Lian Li ATX 205
MSI Z490 Plus Motherboard
Intel Core i7 10700K 3.8 GHz
32 GB RAM DDR4 1600
Nvidia RTX3070

Windows 10 Professional 64 Bit

Flight Gear:

Cougar Hotas S/N 26453
Thrustmaster RCS Rudder Pedals