The hack is to override the requirement to have an audio device yes, if you have one and just want it silent I'd suggest muting the game in the Windows volume mixer or similar to avoid upsetting SHAR.
Usually when it asks to insert CD 1 what it really means is a file (audio, etc) is not found, so it could be a mistake/mod error instead of actually the CD not being there.
You in general might prefer not having the CD and have a full install of SHAR (nothing from CD) and using the no-CD patch to remove the final checks.
Thanks for all the answers there.
Since I legally own a copy of The Simpsons: Hit & Run on PC (which is what I once bought from 2003 and still have it right now), I'd be interested to know how to play SHAR "CDless", or by applying the no-CD patch. Something like those. Then hopefully this crashing error won't commence at all.