The "Bootable" legacy ISO you've used is in fact not bootable, it relies on CDROM emulation provided by BIOS. VMs don't usually do this sort of emulation. If you set the guest OS to something like ...

I'm a complete nub at this, so excuse my ignorance. I just set up a Windows 7 guest on my OS X 10.6 host through VirtualBox. Took me forever to figure out how to get my flash drive to show up on there ...

If you are unable to install guest additions in VirtualBox, follow the solutions mentioned below. Restart your Virtual Machine Remove the guest addition ISO file and then attempt to install it again ...