I have just bought the 1TB version of WD's Passport drive. Like the others, I have tried to format it to remove the annoying "WD Smartware" but it keeps popping up on the desktop. Even if I eject this virtual CD disk, it pops back again instantly.
I searched around the internet and couldn't find a solution. Hopefully WD will release a removal tool in the near future.
The silly thing is that apart from this, the drive is amazing. I can't understand why WD would include such an obviously annoying feature with such a good product.
I think it is even worse for Windows users - when the drive is plugged into a Windows machine the "Found New Hardware" wizard pops up, just for the Virtual CD. This makes it hard to share the drive with others, for sending files over to a client for instance.
While waiting for a proper solution (ie a way to zap this firmware) I have one tiny workaraound that makes it a bit less annoying for me on my Mac. Since Leopard, OSX remembers the position of drives and disks on the desktop. So I have dragged the irritating "WD Smartware" CD icon to the far left of my screen (where I tend to keep other junk). So, now at least it pops up on a part of the desktop that I don't really look at.
(I don't know if it makes a difference, but by default I have my CD and DVD preferences, in System Preferences, set to "do nothing" when a CD or DVD is inserted.)
I have emailed WD, but so far have not received an answer. I expect their logic will be that this "feature" is designed to "protect us" from accidentally erasing their very useful software.