If trying to install it the Amiga way, start from the disk labeled "WB 3.1 Install". This will start the setup process and ask you to insert the disks as needed.
On a real Amiga, you'd have to use HDToolBox (boot from WB 3.1 Workbench disk and look for it in the Tools directory), or the newer HDInstTools from Aminet (hdinst.lha in disk/misc). These tools let you set up your harddrive, create partitions... (I think you can use them on WinUAE, too, just enable "RDB mode" on your harddisk image file). However, you can use several non-RDB-mode harddisk image file for each dhx:
