I had the same "can't find CD" problem with a3.5, though I did manage to get the CD recognized and the alpha installed after some flailing.
I had no CD recognition problems with a3.5.1. Big problem is that LILO cannot boot the other OSes on the computer (Windows 98SE, Windows XP SP3, VL6 Light, VL6 Standard, VL6 SOHO rc3, VL6 SOHO final free version, VL6 SOHO Deluxe). I think this is due to the partitions being identified as /dev/hdax, /dev/hdbx, /dev/hdex in earlier versions of VL and being identified as /dev/sdax, /dev/sdbx, etc., in VL7. I have LILO on floppy disks, so I have a floppy for VL7 and another for earlier VectorLinuxes. I had this problem with an earlier alpha and I think others have also reported it.
We spent a few days with our daughter's family for Thanksgiving, so I haven't had a chance to do much testing. My video, sound, and wired network are working. I'll report anything I find that's broken.
--GrannyGeek