This can be done with our Variants setting for a single product if you want to provide the download for one price and download+CD for another price, giving buyers a menu option to select their preference before they click Add to Cart. If you want to offer a download-only and CD-only version of your product, then you would need to set those up as separate products with their own Add to Cart buttons.
You may be interested in using our SwiftCD integration, to have them duplicate and mail a disc to buyers on-demand whenever an order comes in:
http://www.e-junkie.com/ej/help.integration.htm#swiftcd