For CD32 emulation you need to get 2 kickstart images. They are Kickstart 3.1 (CD32) rev. 40.60 and the CD32 Extended Rom rev 40.60 . Heres the settings you need to use in the WinUAE config.
If you start WinUAE now it will boot straight to the CD32 screen.
To play a game you need the original CD, a backup CD or an ISO+MP3 image mounted on a virtual drive (see below on how to do this).
If you don't have a CD burner then you can use a Virtual CD drive. What this does is to emulate a CDRom using an ISO disk image and some MP3 files for music (if necessary). There are several virtual CD tools around such as Daemon Tools or Alcohol 120%. What they do is treat the disk image as a separate drive for example if you have a C: drive which is your hard disk, a D: drive which is your CDRom then you will get an E: drive which is your virtual CDRom.
To run a CD32 game then you need to get the game CD image including the ISO file, some MP3 files and a CUE file. The cue file is the most important as it holds the information of where the files were held on the original disk. Mount your disk using your Virtual CD tool and WinUAE will pick it up and load it.”
CD32 emulation guide copied from http://www.mameworld.net/easyemu/.