You must do what I said above, the program must see the original floppy (some kind of copy protection I guess); but in DOSBox it doesn't work well. Mounting the image directly with IMGMOUNT and then running the game, sometimes the keydisk error appears, sometimes it doesn't, even if I do exactly the same.
In Virtual PC it's easy, you only have to mount the image file as floppy drive of the virtual machine and it's like the real deal. The keydisk error never appears and there's a crash when PRINCE.EXE is run. Win98 warns about it attempting an illegal operation and kills it; if run from DOS a severe crash happens and I've got to hard reset the machine because even Ctrl+Alt+Supr won't do anything.