Help! cant install.... volumecheck error

ok, so heres the deal. i've had my imac for just under 2 years and its packed to the brim. so today i went and picked up an external hard drive and i backed up all my crap(movies, music, pics, video, ect.) but non of the system stuff because i wanted to do an erase and install so i could do away with all the useless crap the cluttered my computer over time. so after i saved all my stuff, i threw in my install dvd that came with my computer and proceeded to erase EVERYTHING off of my hard drive, which seemed fine until i got into the installer menu and when i went to click on my hard drive it had a red exclamation point over it, and it says "An error was encountered while running the the VolumeCheck tool for Mac OSX". now what the **** does that mean? somethings seriously wrong! it even put two "the"s together back to back in that sentence if you didn't notice. basically at this point i cant get it to do anything cause my hard drive is completely blank. and it wont install on the hard drive cause the volume check tool error. and i dont want to have to partition my new external drive cause now thats the only drive i have with all my movies, music, games, pics ect. and it'd all get erased during the partition.... so where does that leave me? do i have a $2000 paperweight now? i sure hope not. so please, help me. i've been searching all over the internet for about 12 hours now and cant seem to find hardly anything that has to do with "volumecheck tool". please, does anybody know how to overcome this volume check tool error? or even where this "volumecheck tool" is located? is it on the install dvd? i have considered the possibility of it being a faulty dvd or that my computer's operating system may have had an error while being installed from the factory, but i dont really think thats the case. the computer has worked fine until today, zero problems right up until i tried to choose my install destination.

also, i have a 160gb ipod that i use as a hard drive as well. i want to partition this and use it so i can atleast get my computer going but it also says that it has the "volume check error". this is what first got me thinking it may be a disc problem.

however, it only says that OSX cannot startup on my new external drive, which leads me to believe that if it were partitioned, it would work....

so anyone ever have this problem? i couldn't really turn up anything of use from my searches. so any links would be greatly appreciated as well!

thanks in advance....

jeremy.