From FWB's Technical Support:
"CD-ROM Tookit's disk cache gets confused by HFS formatted volumes. The first time you attempt to mount a CD after upgrading to HFS , CD-ROM Toolkit presents a dialog box stating that, due to disk damage or severe disk fragmentation, Toolkit's disk cache cannot be used.
FWB's suggestion is to open CD-ROM Toolkit and turn OFF the "fast" selection for your CD-ROM drive. This turns off all disk caches.'
FWB reports that they are working on a fix and hope to have it uploaded to their web site soon. (Thanks, Mark Booth and Paul Kurzweil.)