Well the following post : http://portableapps.com/node/1774 seems to be closed, so I'll re-open it here
I think building an app that would mount iso's is possible, because the following app :
(look for Yadabyte Disk)
can mound an encrypted disk, and I don't think it requires administrative rights.
Note : yadabyte disk is marked as "temporarily unavailable" bu once I managed to download it - not the source code however ;( - by hitting random files - it's file number 56 or something like this
I've contacted the author and I'll se if he can send me the source code.