Oi oi.. hold on their sailor !! That vmware picture shows you haven't installed any O/S in VMWare, you do this exactly as you would install an O/S fresh on your machine, put in the bootable CD..
Now what you should do is burn that Mandrakelinux-10.0-Community-Download-CD1.1586.iso
to CD.. DONT just WRITE the file, you need to BURN THE IMAGE.. in other words after you've written it, if you go to the disc and see just that one file there, you messed up.. you should see a whole lot of files and directories... in Nero the option is under Recorder >> Burn image.
Once you've burned that image to a CD, you put that CD in the drive, and make sure that drive is selected in your virtual machine properties.. now when you boot it should run the installer from that disc.
I recommend you start from scratch, delete all those old virtual machines you have created (just delete the directories) and create a new virtual machine from scratch.
If you don't want to burn the CD, you can still install it..
Start VMWare, create a new virtual machine (make sure you specify that you plan to install Linux in it), now press CTRL+D, you'll get a box listing 'Hardware'... one of the devices will be 'CD-ROM 1'.. select that..
Now on the right hand side, under the 'Connection' menu, there are two options "Use physical drive', or 'Use ISO image'.. select the 'Use ISO image' radio button and click 'browse'.. now select your ISO file (Mandrakelinux-10.0-Community-Download-CD1.1586.iso)
Now when you boot VMWare, the machine will think that the ISO file is actually a mounted CD-ROM and will boot from the 'CD'..
If this is too complicated read, the VMWare help first.. its very well documented and a bit difficult to explain in a forum.
take care bybye