I am choosing the "cd" folder, in which I have placed both ip.bin and 1st_read.bin. When I create my image, I am choosing Nero TAO. For burning the disc, I am finalizing the disc and have been burning it at 8x speed.
Your walkthrough says I should be getting an option to choose 1dsnes.sh4 as my main binary, but I am not getting this option with BootDreams. I am only able to select if a file is missing from the directory, such as 1st_read.bin, but I know I must have it there as well.
Are you renaming 1DSNES.SH4 to 1ST_READ.BIN? If you are - that's you're problem right there. The IP.BIN that's with DreamSNES points to 1DSNES.SH4. The best idea would be to leave 1DSNES.SH4 as it is, and try burning it again.
That's probably why it's not asking you to select the main binary, either.
But now thinking I'm pretty sure I added 1DSNES.SH4 in the BDS image, so it should have caught that, that is, unless you don't have "Use BDS image" selected in the options, then BootDreams wouldn't know what BDS image to use.