Emulate a CDRW or DVDRW Drive in Windows XP

This may be a consideration:
http://www.ztekware.com/product.htm

I have tried that software but for some reason I cannot get it to burn with all my apps. I get a burn disc failed error (4310) with iTunes.

http://www.daemon-tools.cc/dtcc/download.php

is a good emulator or nero image drive also a good one i use myself

Unfortunately neither one of those will work, Daemon-tools will not emulate a CD burner.  Nero has a image burner but it is only available through Nero.

You say you get a "4310" error when you burn discs.....
Try blocking ALL traffic with your firewall before you burn discs.
This is a built in copy protection.

Is there a reason why it has to be a cdrw? If this is not a requirement, the simpleist solution would be to set up a Shared folder map to it from each computer (this will give it a drive letter) and just put the data there,  

I have found Kerio Personal firewall will eliminate this problem when you "Stop all Traffic" before you burn a disc.

tsieler - I need it to be a cdrw (dvdrw would also work)

markandrew21 - I disabled my network adapter and tried buring a playlist and still get there error.

Its not over the internet, it local, from program to program.
i think its called a 127.0.0.0 call.

I am all good now, had to tweak that app a bit to make it stop the loopback.  Thanks!!!