Should Windows 8.1 display window to place files if double-clicking CD disk icon?
My box does not. It shows absurd "Application not found" message.

How to fix?
Should Windows 8.1 display window to place files if double-clicking CD disk icon?
My box does not. It shows absurd "Application not found" message.

How to fix?
This most likely looks as remnants of some 3rd party software you recently uninstalled, but it had poor-quality uninstaller, not removing all links to software.
You have these options:
try perform registry cleanup so leftover link to your recent software is removed
try return the software you uninstalled or some other DVD-handling software so they will properly renew DVD-handler link to their application.
try searching resources how to fix the problem manually. This can be most lenghty and dangerous, but can help.
General advice: do not use your computer just for trying random 3rd party applications. They often uninstall badly. Test them in virtual machine instead.