The simple answer to your question is that copying a borrowed CD is copyright infringement.
The reason it is infringement is that § 106 of the Copyright gives a copyright owner/holder the "exclusive" right to "reproduce the copyrighted work in copies or phonorecords" and "to distribute copies ... of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending." (emphasis added). The right that the library possesses is the right to "lend" the work and not copy it.
Many consumers assume that if they are not selling the work and merely copying the music that it is not infringement. In almost all cases copying commercial music is copyright infringement. The only exception is where the copyright owner permits copying of their work. Most commercial music (100% of major label music) does not permit copying.
Copying the information on the CD is copyright infringement. See http://goo.gl/4TorH
The above is general information ONLY and is not legal advice, does not form an attorney-client relationship, and should NOT be relied upon to take or refrain from taking any action. I am not your attorney. You should seek the advice of competent counsel before taking any action related to your inquiry.
No, it is illegal. The point is you are copying something that it is not yours, meaning you have not paid the creator of the art her dues. How would you feel if you create one CD and everybody makes copies of it? Right, so don't do it