Okay, so it looks like there are two issues here.
The WD SES driver should install without issue. You might want to try installing using Windows Update. This contains the same driver that's included with the drive, but the different installation method might make a difference. While the drive will work fine without the driver, you may have a more serious issue with your computer that might be worth looking into. The SES driver helps SmartWare monitor your drive health, temperature, and so forth.
If all else fails, you can go into device manager, find the WD SES device, and disable the WD SES device, which will keep the New Hardwaer Found Wizard from popping up.
The booting problem is simply that your laptop is trying to boot from a CD-ROM drive before your internal hard drive and it is finding the Passport's Virtual CD. You can fix that either by entering your BIOS setup during bootup and changing your boot priority to look at your internal drive before any CD drives. Alternatively, as long as you do not have a password set on your drive you can use SmartWare to disable the Virtual CD on the Passport.
Let me know if any of these suggestions help.