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After I set up the hard drive and run the VM it asks for the bootable media.[/b]
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Nope. You have to enter VM's BIOS settings first and make sure it boots from the floppy first.
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Then I insert the bootable DOS floppy it will install DOS on the virtual hard drive. Right?[/b]
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No. You need the installation disk (not the same thing). Bootfloppy would only enable you to run DOS on that machine, without installing it.