The way you outline will work for copying files from the host to the guest. (You should not need to burn a physical CD, however. There are a number of programs around that will create an ISO image for you with the files you want, and you can use that in the guest as though it were a CD.)
However you may not be able to find a program that will copy files from the Windows 95 guest onto a CD (whether an ISO image or a physical disc).
A better way is to use networking to set up a shared folder that can be accessed by both the host and the guest. Using Windows 95 inside Windows 7, I have not been able to get the guest to access any host files, but you
can do it the other way round. You can set up a folder on the guest that the host can use. It is a bit fiddly, because the network drivers included in Windows 95 won't work on their own, but can be updated.
Proceed as follows:
In the Network section of the Vbox machine settings, make sure you have enabled one network adapter, and attach it to "Bridged Adapter". (The Name is unimportant, and is defined by the host. The default settings under Advanced are correct, but if you want to check: Adapter Type should be PCnet-Fast III, Promiscuous Mode: Deny and Cable connection: checked.)
Enabling the adapter will force the Network to install on Windows 95 when it is booted, if it hasn't already been done. Setting "Bridged Adapter" will not make any difference inside the guest.
Make sure the Workgroup name is the same in the guest and the host. For the Windows 7 host, This is displayed on the Computer | Properties screen. If you are installing the Network for the first time in the guest, just set it when asked along with the computer name (which should be something more sensible than "Default"). Once the guest Network has been set up, you can change these details from "Network Neighbourhood | Properties | Identification".)
After installation, you have to give a User name, but the password can be blank.
At this stage the guest network is capable of communicating with other Windows 95 networks, but not with the Windows 7 host. This is pricipally because to do that you need TCP/IP, which is not included in Windows 95. However it is included in the Windows 95 Dial-up Networking update. (Do not rely on the version that comes with MSIE 5.5 - that is incomplete.)
Although you do not need DUN itself, it is simplest to install the whole package:
Download DUN14-95.EXE, for example from one of the mirrors at:
http://www.filewatcher.com/m/dun14-95.e ... 376-0.html Put this file on an ISO image (see above), and load this as a virtual CD in Windows 95. Run the EXE program from within Windows 95 (telling it, of course, that you do want to install TCP/IP if it asks). Wait until it finishes (it is quite a long procedure, including one or more reboots).
You are now in a position to share data between the guest and host. Enable File and Print Sharing in the guest: From "Network Neighbourhood | Properties | Configuration" click the "File and Print Sharing..." button, check "I want to be able to give others access to my files", and after a couple of "OK"s you will have to reboot.
Now create a folder on the guest that you want to be the shared folder. In Windows Explorer right-click on this and select "Sharing...", select "Shared As", the Share Name is the name the host will see for the folder. I suggest you suggest Access Type: Full and do not add a password. After you have clicked "OK", you will see that the folder icon now has a little sharing hand beneath it.
Within the guest you can access this folder like any other.
On the Windows 7 host, open Explorer. Click Network, wait a few seconds and the guest should appear in the list of computers along the top. (It may be necessary to click Refresh.) Open this "computer" in Explorer, and the guest's shared folder should be directly accessible to read from or write to.
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