I’m not sure what would be the right approach in this situation. I need to map Windows drive letter to a custom Web DAV connected server. Or in other words, when a user goes to My Computer, then, say, goes to drive Z: they should see files and folders from that Web DAV server.
My preferred programming language is C/C++/MFC.
Is my only option a kernel mode device driver?
No. What you are asking for can be accomplished by creating a Shell Namespace Extension instead.