Microsoft intentionally blocked it from running on Vista machines due to incompatibility with how their new OS runs.
It's Microsoft's fault that Alcohol's program causes major instabilities with a new OS?!? Well I suppose it is, but D-T fixed their game, while Alcohol did not. If the incompatibilities are anything like Daemon Tools's, it could range from not installing the cdrom device (and popping up every reboot trying to install detected devices) to blue screens of death during bootup, every bootup.
Microsoft blocked access to underlying API's that Alcohol relied on for its Virtual Drives.
Assuming again that that was the same sort of way that D-Tools operated (being that the two teams work closely together), they are having no problems now, which would suggest that they never had a need to use that API/those methods in the first place. It's the same as what a lot of virus companies were complaining about - get the hell out of MS's kernel you freaks!!! Avast! runs perfectly fine on Vista - you can too. Stop screwing up my system files - I'm looking at you, Symantec.
How is that Alcohol's fault?
Well I guess I'll just repeat myself:
They refuse to do a Vista compatible port until it is released proper. It took Daemon Tools some time after beta 2 was released to make a working version - so expect Alcohol 120% to take 'some time' after Vista is released to the public too...