I am using an almost identical install now as I was with SR-1a.
The only two major differences are that I'm now using NLite,
and SR-2. It is interesting to note that my install does complete
if left alone, despite the nag screen. When it is finished, Alcohol 120%
works fine.
I'm suspecting that this has something to do with SR-2. Perhaps
as Alcohol is installing the virtual CD drivers, it forces a hardware
detection refresh. Windows may be wanting to install drivers for
the virtual CD drive on it's own, despite the fact that there has
already been a driver installed.
I also wonder if this has something to do with the new protocols
of not installing unsigned drivers. Others have noted that the new
Nvidia Forcewave 61.77 drivers (which are currently the only ones
that support DirectX 9.0c) will not slipstream because they are not
signed. I have confirmed this myself.
My current guess is that since Microsoft has decided to make SR-2
the "Security Awareness" release, that they have made driver
installation more restrictive (especially to a slipstream install).
My next step is going to be to make a custom installation package
just for Alcohol. Perhaps something along the line of using InstallRite
which appears to just throw the software in the correct directories
and then patch the registry. Perhaps that can bypass the hardware
detection problem.
But that is for another day. I've got to get some sleep.