I've been using MagicDisc for a while, since it's simple and no-nonsense and works. But with the GPL violations and senseless new-image-format crap mentioned by Lashiec above, perhaps it's time to reconsider :/
I've used SlySoft's VirtualCloneDrive as well, and it was pretty good - it had problems when I initially moved to Win7, though, and iirc it was only controllable through an Explorer Shell extension... and it only installed the x64 version on my system, meaning I couldn't configure through my 32bit copy of explorer^2. Other than that, excellent app.
Stay away from Daemon-tools and the like. There's been adware in the DT installers, and there's a whole crapload of copy-protection defeating stuff running in kernel mode that you don't really want unless you need that kind of thing.