We use lots of CDs and DVDs for installing software. While CDs have many disadvantages one other disadvantage is about waste. One idea could be to have a device that can be programmed to behave as a CD/DVD drive and a mechanism to simulate inserting different disks.
The closest solution I notice as under development project is http://renosite.com/ - 'USB CD Emulator'.
I was thinking to combine iPod & iPodLinux and additional software for converting iso to cd drive and other UI part to select the ISO to be presented.
I do have iPod 20GB Fourth Generation (Gray scale). The batery is gone or going... If I can get it to work in the above fashion, I am sure this can be a great break through. I might be able to get funding for greening efforts too.