We would much rather have those CABs files (et al) on your hard drive.
NOTE: this should only be done if Windows frequently asks you to insert the system CD.
To proceed, copy everything sitting in the system CD's SETUP folder (Usually D:\Win95 or D:\Win98) over to a new location (e.g., C:\Windows\Options\Cabs)
Fire up REGEDIT.
Navigate to HKEY_LOCAL_MACHINE \ Software \ Microsoft \ Windows \ CurrentVersion \ Setup.
Edit the SourcePath string and enter the new file path (e.g., C:\Windows\Options\Cabs).
The next time your OS needs to access any of those files, it'll know where to find them first.
This should work fine for all 9x versions of Windows.