I think that you are missing the fact that a lot of the computers that were around when win95/win98 first came out did NOT support booting from the cd-rom drive. This was a bios limitation if I remember correctly.
The other possibility is that they usually kept the windows cab files on the hd before installing, so after you had msdos installed, you could copy all of the setup files onto the HD and then run setup from the hd, with the benefit that if you needed drivers rom them, the files were already available on the hd instead of having to put in the cd.
Now, most people should just be able to pop in the cd and install the OS without the hassle of installing dos.
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