Well, assuming you're using the copy of Sonic CD off of this website (same one I'm using & know for a fact works), the only explanation I have is that it was somehow corrupted during the download. You could try redownloading it, or even redownloading Kega Fusion.

I could also note I'm using, more specifically, Fusion V3.64, on the off chance you happen to be using a different version, doubtful as that is.