To create a bootable CD you need a bootable drive which can be used as model for the bootable CD. Generally there are three kinds of bootable CDs:
1. Floppy emulation: To create the bootable CD you need a bootable floppy disk as model. Such a CD, behaves after booting just as if a floppy disk would have been inserted into the floppy drive. This also true for the drive letter which is of course 'A'. The floppy disk drive (normally 'A') may then be accessed through the drive letter 'B'. The amount of the boot data is of course limited by the maximum capacity of the floppy disk (for example 1.44 MB).
2. Hard disk emulation: The model for such a CD is a bootable hard disk drive. The bootable CD behaves as if it were drive 'C' after booting. Your old drive 'C' may be accessed through the drive letter 'D', drive 'E' becomes 'F' and so on. Because a CD can only store up to 640MB the size of your model drive must not exceed 640MB. For example, if you have a 2GB hard disk with a single partition, then it's impossible to use this drive as model for a bootable CD. All you can do in such a case is to change the size of your hard disk partition. Normally, all data is lost if the partition sizes is changed using FDISK. But there are several tools available on the market which allow partitioning changes without losing data.
3. No emulation: This feature is designed only for professionals, who want to create their own hard disk and CD-ROM drivers. This method for example is used for Windows NT 4.0 Server CD.
The model for creating a bootable CD may be either a logical drive (all those drives which may be accessed through a drive letter; for example 'C') or an image file of a drive. Such image files contain all sectors of a drive stored in a file. Such files may for example be created using 'Norton Disk Editor' or 'WinImage'.
A very sad limitation of bootable CDs is the fact that currently no high level operating system like Windows 95/98 or NT may be booted from a read only device. This limitation exists because all these operating systems try to write on the boot device during the boot process. Of course it's just impossible to write to a CD-ROM drive. The resulting write error is fatal and causes the boot process to be aborted. Bootable CDs exist for other platforms like MacOS or Unix for several years and are used with great success.
So in the end good old DOS is currently the only operating system that may be booted from a CD. Of course, you can create a Windows 95/98 boot CD and interrupt the boot process by pressing F8 at the right time. Booting only DOS again should work perfectly.