I've been asking for a lot of help around here because my computers all suck, so I thought I'd try to give back with this little helpful hint. I'll be happy if at least one person finds this helpful.
If you like to use Virtual CDs (via Daemon Tools or what have you) to boost performance, and you own the real CDs from which the virtuals were copied (because otherwise it's illegal!!!), then you may have noticed that when you run FF8 no matter which VCD you have loaded, it can't find it. That's because it's looking at your REAL CD drive for the discs. Here's how to make it look at your Virtual Drive (I believe it has to be a permanent one, like those created by Daemon Tools):
This should be the same in any Windows (although FF8 won't work on Vista, as far as I know and have tried)
Hit Start, then click Run.
Type into the box "regedit" without the "s.
Open HKey_Local_machine
Open Software
Open Square Soft, Inc. (there will be more than one of these if you have other Square games installed, so find the one that contains Final Fantasy VIII)
Open Final Fantasy VIII
Click 1.00
In the large screen to the right of that menu you just played with, there should now be a list of items.
At the end of the line that says DataDrive, it should say "[letter]:". The [letter] will be the letter of your current REAL disc drive.
What you need to do is right click DateDrive, then click Modify.
A box will come up that says Value Data, with a box for you to enter something. Replace the letter that is there with the letter of your Virtual CD drive. If you don't know what it is, and you're running Daemon Tools, left-click your Daemon Tools icon in the lower right corner of your task bar. Find whichever device holds your virtual cd. It should tell you it's letter.
So, if your REAL drive is "D:", then in the Value Data box it will say "D:". If your Virtual drive is "F:", then change the "D:" to "F:" (yes the colon IS NECESSARY).
Now, FF8 will search your virtual drive for data rather than your real drive, and you should be good to go.
I hope someone will find this useful. If this has already been posted somewhere, then I'm gonna go cry because I wasted all this time...