Use the latest recommended SheepShaver build, it will enable you to easily add disk images to the volumes list as CD-ROM. viewtopic.php?f=20&t=7360Edit:
I see you do use the latest build. But, judging by the image you show, you use the old SheepShaverPrefs application for the settings. Better use the built-in preferences editor that is present in SheepShaver builds for more than 10 years and that is described in the setup manual.2.
I do not know what you did with the download, but after decompressing the downloaded .zip file, you get the disk image file "Mac OS 9.toast". It can be added as such to the volumes list. SheepShaver can read all kinds of image files, including .toast files.3.
If you have more than one bootable volume in the volumes list, the one that you want to boot from should be at the top of the list.Edit:4.
have "Disable CD-ROM Driver" checked in Preferences!