Hi baikazaa!
Your inability to boot off the CD with a firmware password enabled is functioning correctly. Please visit the link below:
http://docs.info.apple.com/article.html?artnum=106482
With an open firmware password "enabled" you won't be able to do the following:
1. Hold the "C" key to start up from an optical disc
2. Hold the "N" key to start up from a NetBoot server
3. Hold the "T" key to start up in Target Disk Mode
4. Hold the "D" key to start up the Apple Diagnostic Utility
5. Hold the "Command & S" key combination to start up in Single-user Mode
6. Hold the "Command-Option-R-R" key combination to reset the PRAM
7. Hold the "Command & V" key combination to start up in Verbose Mode
8. Hold the "Shift" key to start up in Safe Mode
You'll need to disable the open firmware password for the purposes of troubleshooting further, that is, if you wish to boot off the install DVD.