Yep that's correct it does. The following is taken from the readme of petes cdr plugin...
By pure luck I checked lazily my native W2K funcs with FPSE,
instead of ePSXe... and BOOOOM... suddenly my code also was
working fast! Even on both of my drives! Started ePSXe again...
slow! Started FPSE... fast! WTF?!? Well, finally I've found the
reason: if you are enabling CDDA support in ePSXe, the emu
is communicating directly with the cdrom drive, bypassing
the cdr plugin... and that's something W2K obiously doesn't like
much... BAD, calb, BAD
Oki, lesson learned: if you want to use a different cdr plugin
(not the native epsxe one) with W2k, you have to disable the
epsxe cdda support... at least until epsxe 1.5 is released
(you better run fast, calb, or I will kick your sorry ass
Not a big issue, since most games are not using cdda at all.