1) i would use the cd to save the 'original' install(KEYWORD) file(s)...like i said in my previous reply, windows proggy's throw misc. files all over the place when the actual install takes place.
2)yes you can use your cd-rw disc as a GIANT floppy, as RJ said in his reply
as far as the game you're talking about, i'm not familiar with it, so i don't know how to comment as far as running it/playing it directly from the cd itself...i guess if Snood.exe is the only file and actually runs/executes/starts the game then yes, but if it is an install file, i doubt it, because once again if it is windows based and it is a compressed installation file, it will want to throw it's dependant files all over the hard drive in different locations, mostly the ..\windows\system directory (couple dll's here, couple ocx's there, a registry key or 2 in your registry etc.)
i've dowloaded and bought software off the net too, and they are the INSTALLATION file(s), so what i do is burn them to cd, that way, i have a copy of the ORIGINAL(installation file) just in case, but i also add to that disc(cd) a .txt file that has the cd-key or serial number etc., cuz that's something that i know i would lose for sure, if i didn't..
hope it's a little clearer now