So the configuration program ran ok (and let you set the resolution, etc), but when the game tries to start it is not recognizing the play CD?
I'm not sure why the game would reject the CD if the install program was (apparently) fine with it. In Windows Explorer, check the game CD; browse to the '[optical drive]:\disc3\static' folder, and see if there are 5 *.bik files listed there. The game checks for a CD named LARIAN_DIV3 and tries to play the intro videos upon game startup. Right click on your optical drive letter and select Properties, to make sure Windows is reading/reporting the correct name. You can check if there is a problem reading the videos by copying them to your hard drive (and then deleting the copies); if there is no error then the game should not have a problem either.
Try a different optical drive (if possible); some drives have more trouble with some CDs than others. Also, check the CD for any physical damage; even a finger print or dust might interfere with it reading properly.
You could try installing the
patch. Some re-release versions of the game may already be updated to the latest 1.0034A version, as shown in the bottom right corner of the main menu (not that that helps you at the moment...), so would not need to be patched. The DVD version is already updated, and the patch (designed for the CD version) should not be installed.
Unless the packaging or CDs indicate the game is the latest version, you can just install the patch anyway (installing it over an already updated CD version will not cause any problems).
There is a configuration file edit to skip the intro videos (see
here).
With the latest game version, this will also eliminate the need for the Play CD, except for a couple cases: the blessing ceremony (after hitting the gong late in the game) and at the end of the game. These are the same limitations as with the no-CD hack.
You will need to get the play CD recognized at some point, but this should at least let you get started with the game.
Troubleshooting Tips (& manual install procedure)