Amiga Forever 2005 comes in three different versions:
1) Online Edition is a downloadable .exe installer
2) Plus Edition comes as a downloadable ISO image which can be burnt to CD
3) Premium Edition is an original physical CD bundled with two DVDs.
Which version do you have? Are you sure you have Amiga Forever 2005 and not v5?
Chronologically there was v5, then v6, then 2005, then 2006 and the latest one is 2008. Default AmiKit supports versions 2005 and higher. This means versions like 6 or 5 or any earlier versions are NOT officially supported. More info on how to use unsupported Amiga Forever versions with AmiKit is here
Anyway, there are two options how to use Amiga Forever 2005 or higher with AmiKit. Either install it and then select "AF Installed" button when AmiKit asks for the source of system files OR simply insert your Amiga Forever CD into the drive and select "AmigaForever CD" button. The second option doesn't require Amiga Forever to be installed before.