Did you install directly from the CD? Did you install the SEPM on another dedicated machine?
I think, the client is looking for the install directory for updates and as it was done from the CD it always wants the CD. If you deploy from the SPEM directly, you should not have this problem, I believe.
Alternatively, if you create a deployment package from the SEPM, and use that for installation as opposed to the CD. I could be totally off...
I have seen things like this in the past from other products, where if you installed from a network drive, whenever it wanted features or updates, it would always look at the original install location.