I went to the GUI and then started the CD through there. It seemed it would work but I got the same OS screen.
I repeated it and this time it booted after showing me the OS screen for a brief while.
Then I did it successfully 3 times in a row just to check.
The weirdest thing is that the first time around I left it on for minutes and it wouldn't leave the OS screen at all.
I know this is an old topic but just in case anyone finds this and needs help on this in the future, what works reliably for me is to start the Marty with the CD tray open, then (with the game in) close it once it gets to the "stars" screen and starts playing the music. This should get you past the Towns OS screen and into the game. I have no clue why it does this, and this is the only Towns game I have that needs this trick.