The way you do this is going to be influenced by how you might want to access the archive later.
I have used Excel to create image archives in the past - you can insert images into an Excel cell just as easily as anything else, and then use other columns to record image information - dates, image sizes, locations, copyright restrictions, or whatever. It works very well, and you can simply write the spreadsheet to a CD.
Alternatively you can use Windows folders to create a nested heirarchy, with images placed into the various subfolders by category or date, or any other criteria you choose. Write the whole lot to a CD and you have a archive that's a piece of cake to search.
You need software to do the writing of course, and if you have Windows XP the problem's solved by the built in CD writing facility. Otherwise you'll need a third party application like Nero.
Store your images as jpegs (or gifs if they are simple graphics) if you don't need very high resolutions - that way you'll get more onto a disk.
Obviously the FE is quite correct, but you don't want to do that do you?. I am now using ECDC 6 and just "Drag to Disk" ECDC 6 automatically formats the the disk when you move your first file. I find it to be the "cat's whisker"
You do not need waste money on audio CD's they are only for standalone CD players. as to you question I create folders in Explorer with different names then after formatting a CD or CDRW with DirectCD I just drag folders onto CD in Explorer
If you're using Nero, for example, insert your CD-R and from the Wizard, choose to create a New Data CD. Using the interface drag your images to the burn window on the left and then click the Burn button. If you find you have more images to burn after that, re-insert the CD-R and choose to "Continue with an existing Data CD (multisession)", that way you don't have to burn them all at the same time.