Pretty sure it can but I don't have one. Maybe I can find one for cheap. Might be handy to have a dvd drive for it.
After I posted this I did remember that MCE 2005 requires you to swap the two discs a couple times so that might be kind of hard to do without a CD rom drive.
Actually, now that I think of it I do have an Xbox 360 HD-DVD drive. Wonder if that would work...