Dumb question. But need help.

So I've downloaded my first BL game (Zettai Fukuju Meirei). I extract it and go to setup. Then it says I need the CD. Do I REALLY need a CD, or is there a special way you need to do it? If so, how?

I don't have space to download that game now but as general rule:
archives containing cd images (*.cue,*.bin,*.iso etc) should be "mounted" with daemon tools. It's freeware.
Daemon tool simultate the presence of a real cd, allowing to bypass the cdcheck.
Also, this same program can emulate most of the anty piracy cd protections.

I use the professional version so it could be different, however this is how you use it.
-After the installation, launch the daemon tool agent to get the icon near the clock.
-Right clic it it. Select virtual CD>scsi drive.
-Right clic again, again virtual cd, but this time select the unit on the top of the menu> Mount Image. Select the game file ( something with extension *.bin *.cue *.iso *.ccd...).
-This should launch the autorun of the game. Or you can run it like a normal CD in the "my computer" panel.

I do what you tell me too, but instead of the auto run, it goes to AODISC2 (E: ) and inside is a file called Chip. It's a BitZipper ARC Archive

Sorry for the late answer.
AODISC2, sound like you mount the cd 2 image? The auto run should be on CD 1.