I gather you already have the Grolier program installed, so we'll work from there.
If not, get the CD in the drive, then access it in Explorer (or your file manager of choice). Double-click Setup.exe to begin installation. Once installed, check to ensure the encyclopedia works with the CD in the drive if you have not done so.
It works? Good!
Now, download and install MagicDisc. http://www.magiciso.com/download.htm
Note that when you start the program, it lives in the system tray.
Also note, it will want to autostart with Windows. I don't like autostarting programs that I do not use constantly, so I used MS Sysinternals Autoruns to disable the autostart entry. http://technet.microsoft.com/en-us/sysinternals/bb963902.aspx
Just look for the MagicDisc name and icon in the Everything tab, and clear the check box.
Now, you want to start MagicDisc, right-click the systray icon, and select Make CD/DVD Image. (You want the Grolier CD in the drive for this.) Select the drive with the CD if you have more than one. Choose the output format as ISO to be safe, but I'd think that the default UIF would work as well. For the output file, click the folder and browse to the directory of your choice, default is My Documents. Name the file NGMECL. Click OK. (This will take a few minutes.)
Now, you want to check the virtual drive letter. Mouse-over the top entry in the menu (Virtual CD/DVD ROM) to determine this. Got it?
Now, open your file manager, and navigate to the install directory for the Encyclopedia (C:\NGMECL) and open the file NGME.INI in a text editor. Change the entry Disk=X to reflect your virtual drive letter. Save and exit.
Running the Encyclopedia:
Start MagicDisc, mouse over Virtual CD/DVD ROM, the ensuing X: No Media menu item, and click Mount. Navigate to the NGMECL.iso image and select it.
Now, simply start the Encyclopedia from the Start Menu.
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Actually, I now notice that mine is the 1994 edition release 6 (it said copyright 1993 on the disc). If your INI file is slightly different, edit accordingly or post back.
Cheers!