"E:\SETUP" should work if SETUP.EXE is in the Root directory of the CD. "E:\WIN95:\SETUP" will not work because of the : (Colon) following WIN95.
You may be able to get round the problems you are having by navigating to the directory containing the SETUP file. i.e. from the C drive enter E: to move the the E Drive (CD Drive) and then CD WIN95 to move into the WIN95 directory. Once in the WIN95 directory enter SETUP at the command prompt.
Another, and possibly better, way round your problem of reading the data off you floppy disks would be to use an external USB Floppy Disk Drive and plug it into your more up to date computer.