I haven't encountered this particular message, but it seems you're not the first...

1. Which Rayman version is it? Which CD?
2. Is the error when trying to run the game or already when trying to install?
3. Have you tried other CD-ROM drivers (like VIDE-CDD.SYS) from that website you linked to?
4. What exactly are the relevant lines in CONFIG/AUTOEXEC (loading the CD driver and MSCDEX)?

superfury: I'm sorry that this will probably not help your particular situation, but you may find more efficient replacements to the CD driver and MSCDEX at https://dosprograms.info.tt/indexall.htm#utils. They may or may not help with your problem but should require less RAM than the originals.

From what I can tell the message has nothing to do with MSCDEX itself and is the game's DRM telling you it can't find a genuine disc, solutions seem to be to use a later version of the game if using a physical disc or patch the protection out of the game executable if running from HDD or using a virtual drive.

So basically the disk read or TOC read is failing somehow? My emulation is reading the cuesheet with it's .bin file (trying to create an image for my physical copy seems to fail at the start of the disc for some reason, probably some scratches).
I seem to remember the cue/bin running fine inside Windows 9x? Or is there now an error in my cue/bin file parsing somehow?

How should the INDEX 00 and PREGAP and POSTGAP commands affect the bin and read layout of the disc? How does a CD-ROM drive handle those during the Read CD and read sector commands?

OK. I've looked into what the rayman.exe is actually doing when it starts up until it reaches the error point.
It tries a mode sense command 4 times for page 2Ah.
Then I see it executing 4 mode sense ATAPI commands, followed by a Read Sub-channel command, after which it throws the error.
The Read Sub-channel command has a format of 1 (CD-ROM current position).
But the software gives the MSCDEX error immediately after this?

The command packet is like this:
42=Read sub-channel
02 =MSF 1
00=SubQ 0. Header only.
01 =sub-channel data format =CD-ROM current position
00 =reserved
00 =reserved
00 =track number
00 =allocation length high
04 =allocation length low = 4
00 =reserved
00 =reserved
00 =reserved

It returns a packet with a size of 4 bytes (containing just the player status, which is inactive as it's not playing anything).