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The CD Image destination is used to specify where FotoAlbum will copy all necessary files to create the FotoAlbum CD. This location must have enough space to copy all pictures and the read-only FotoAlbum software.
It can be the drive letter of your CD-RW drive if your drive supports DirectCD (ability to write directly to the CD-RW using a drive letter). Refer to your CD-RW user manual to see if this option is available to you.
The CD Image destination can NOT be a sub-folder of your picture folder because it copies files from your picture folder into this folder.