That image you posted is not from the W7 install, is it? What it seems to be to me is from the Dell d/l install which is for the firmware because that is what TSDNWIN is.
This LINK is the instruction for the install, and would never appear in the W7 install.
Another LINK to pick up the file from Dell.
From DELL'S SITE for the file, this IS NOT a driver!!
Firmware for TSST TS-H653J 16X DVD+/-RW SATA HH
Now it is possible with the OLDER driver (you CAN check via DEVICE MANAGER or SYSTEM INFORMATION what you now have) W7 can't recognize the device and wants a driver for it. If this were the case in Vista update the FIRMWARE. Still, I don't think this is needed.
My W8 system uses MS's CDROM.SYS to access BOTH of my DVD's, one a TSST one. Under Device Manager for the drive in Vista I suspect you'd see the same? There are 2 other drivers with it, one for GEAR and another ASPI as my DVD's are IDE, yours is probably SATA I assume, but I think it uses the same base drivers.
So that leads to the install media? Are you installing via a DVD on that same drive? Is this an 'official' W7 that you got from MS or an ISO you burned (assuming it isn't a CRACKED ISO)? If you burned the ISO, try re-making the DVD, you could have had a failure, matter of fact, get the ISO again as well. If it is an official MS DVD, check the DVD surface to make sure it isn't clean or scratched.
Like I said, your screenshot was not from the install. If you have a digital camera you can capture the actual fail dialog box and that might help us.
On your screenshot above all you should have needed to do was check the box for the file and then it should have appeared below in the F/W File box and you should have been able to install it? Also, if that failed, check the cable for the drive, it might be loose on some pins causing the problem.