By default, Project 64 creates folders inside it's installation folder - one for plugins, one for N64 battery saves, one for save states etc. etc. And obviously these are the folder PJ64 will also use by default.
Now, you have Project64 on a CD-ROM (or a DVD-ROM, whichever you might have) meaning that PJ64 can neither create these folders nor write data to these folder because the nature of the regular CD/DVD-ROM is being read-only.
Sure, the plugins will work and the roms will load and play, because the emulator only uses them from their respective folders and doesn't try to alter them in anyway. Not so with screenshots and saves and whatnot.
A way around this is to provide an alternate location that that can be written to, the best place being your hard disk. So simply open up Project64 and select Options --> Settings --> Directories and specify path for both savetypes and screenshots on your HDD (i.e. C:\Project64\Saves for both N64 Auto-saves (battery saves) and Instant Saves (save states). Project64 should automatically create the folder structure you specify on your hard drive. Then click OK and hope for the best.
Then again, if you plan on getting new games, then you have to specify an alternate directory path for them as well, since you can't put them on a disc. Doing so will prevent you from playing the games on the disc, since the path no longer points to those. In this case, it's best that you copy the games from the disc to your HDD.
Although in light of what you've told me, I'm more than inclined to tell you this: you should make an effort to take your time and learn how to work with files on your computer prior to even glancing at emulators. Granted, a solution like this requires minimal effort from your part, but will lead to various problems quickly (as you've already noticed) and in turn create even more problems.
