When the VM is actually powered on, check the VM settings to make SURE the CD is actually connected to the ISO file. I've had this as an issue from time to time. Once you confirm that the VM is seeing the ISO, and it's actually connected (in the 'edit settings' panel, then give the VM a three key salute and see if it picks up the virtual CD for the boot. You can also check the bios settings of the VM to make sure the CD is listed in the boot order. I would set the CD to the second option, so that it will boot from the vmdk first (once the OS is installed). I've found this helpful for when others are working on VMs and need an ISO mounted to the CD at all times (the OS install ISO most of the time). This setting prevents the VM from booting into the OS installer on each reboot.