Back in the day when I ran a 560 as my main machine, I used a PCMCIA based CD-Rom. It has a driver disc (3.5" floppy). If I recall correctly, this is the procedure I used:
1. Format drive /s using Windows 95/98/ME boot floppy.
2. Install driver for CD drive.
3. Run Windows disc from CD drive.
Perhaps there is a DOS driver for the onboard CD drive?
Current Thinkpads: 600E, 600X, 701C, A31 (Flexview), R51 (Flexview), R60, T42P (Flexview), TR50E, T60 (Flexview), X61s (Ultralight), Z61m (Ti) Non-Thinkpad: Toshiba 100ct