A "live" version of Windows is called WinPE (Preinstallation Environment). Quoting the MS Technet article on how to create a WinPE CD/DVD:
Install the Windows ADK
Install the following features from the Windows Assessment and Deployment Kit (Windows ADK):
Deployment Tools: includes the Deployment and Imaging Tools Environment.
Windows Preinstallation Environment : includes the files used to install Windows PE.
Install Windows PE to a DVD, a CD, or an ISO file
Click Start, and type deployment. Right-click Deployment and Imaging Tools Environment and then select Run as administrator.
Create a working copy of the Windows PE files. Specify either x86 or amd64:
copype amd64 C:\WinPE_amd64
Create an ISO file containing the Windows PE files:
MakeWinPEMedia /ISO C:\WinPE_amd64 C:\WinPE_amd64\WinPE_amd64.iso
To burn a DVD or CD: In Windows Explorer, right-click the ISO file, and select Burn disc image > Burn, and follow the prompts.
Be sure to read the ADK's license agreement, I couldn't find the latest online. Usage of WinPE is usually granted for maintenance and troubleshooting of other systems online, it's not to be used as a thin client or similar.