Hi balaji...Welcome to g2g!
Daemon Tools (and Alcohol) uses a rootkit to achieve it's drive emulation feature in order to circumvent copyright protection imbedded in the cd/dvd you are copying. In order to do this, it hides or "cloaks" registry values that "hooks" the devices used to play or copy said material. There is ongoing debate as to the legality of this practice, but to me, a rootkit is a rootkit...no difference between a good one and a bad one. For a little more information on this, see This Article
Post in Malware from the link I've provided below and put "Possible RootKit" infection in the title of your post...they are very interested in these infections right now and that will attract their attention.Do Not use RootKit removal tools without the supervision of someone who is experienced with them...they can cause a lot of problems if not used properly.
Please go to the Malware Forum
and follow the instructions at the top....Especially the Start Here
...then post a HiJackThis log in THAT Forum
as I described above. Be patient, the Malware Forum is a very busy place and a two or three day wait is not unusual. DO NOT REPLY TO OR BUMP YOUR OWN LOG. If it shows a reply it may be overlooked as one that is being worked on.
If you are still having problems after getting a clean bill of health from the malware expert, please return to this thread.