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Hmm...
I just dumped all 3 of my Diablo II CD's to a folder on my hd, dragged all the files from that folder into WinISO and saved an ISO image, mounted the ISO in Daemon Tools and ran the SETUP.EXE, selected FULL INSTALL and it installed without asking to insert any CD. Just needs CD2 in the drive to play!
Uninstalled and tried just a Single Player then a Multiplayer install, and again it didn't ask to insert any CD. Burned the files to a DVD+RW to test installing from a DVD drive and does not ask for any CD's after trying all 3 install options!
Are you copying the files to the root of the DVD?
Also, only copy the D2CHAR.MPQ and D2MUSIC.MPQ files from CD2/Play Disc and the D2VIDEO.MPQ file from CD3/Cinematics Disc to the DVD.
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