mrmiagi

I've extracted the files and mounted one of them, but the game still insists on inserting a disc

Hey Boop878, you're not crazy. I had all the same problems. 
I wished to install Edain mod with 2.01. The mdf mini-disk image DOES work. That is not the problem.
Your problem is probably that you are trying to start the game with Edain's "play" button. Switch the mod on, then start the game with the original shortcut on your desktop. I don't know why this made the difference for me but it did.
If it still doesn'y work, make sure both the mini disk files are in the same folder when you launch it. Also, you only need the mini disk image running, no others.
hope this  helps. I made an account just to share my findings since the rest of this community helped me out so much.
Cheers