Yes, it does work with Win7 ISO, even using a physical dvd Win7 installer.
It's an LG DVD-DL RW drive, SATA connected, the board is Gigabyte GA-945G-S3.
They recommend VIRTIO instead of IDE or SATA.
If you will be using VIRTIO, here is the driver you need (http://alt.fedoraproject.org/pub/alt/virtio-win/15/images/bin/virtio-win-0.1-mm34.iso) which needs to be uploaded thru your PVE console (ISO Images) then add 2nd IDE pointing to your VIRTIO...