Checked my own 3.1 set from 1994 and it's as Mike describes

So, things to check are:
-CD drive properly installed/terminated
-CD0 in Devs: DOSDrivers
-Tooltypes of CD0 set to the correct device name and unit number
Things we haven't gone over yet:
-Commodore's CDFS is
terrible. It may simply be failing to read the disc correctly. Try another disc.
-Does BetterWB have a different CDFS pre-installed? If so, its CD0 and/or CD1 will be a bit different, but the core principle is the same: make sure the correct device name and unit number are set. You may need to make those edits by opening CD0 in a text editor instead of in the icon information window.