Just a note:
No version of windows automatically loads the cab files onto the hard drive.
Having the cab's on the drive started out as a way for system mfgs. to speed up the setup process when assembling PCs.
The only real advantage of havingthe cab files on the drive is that you don't need the CD when Windows needs to install files for new devices or network protocols.
If you are running an older version of W95, can you afford the 70MB of drive space that the files take up?
Also,having the cab files on the drive will not upgrade your version of windows.
The simplest way to point Windows to use the cab files from the hard drive, is to direct windows to the folder the next time it asks for the windows CD.
The other way is to edit the install location file path in the registry.
CAUTION!!! ERRORS MADE WHILE EDITING THE REGISTRY CAN DISABLE YOUR PC!!!
If you are looking for an upgrade, I would suggest going with W98SE.