panic:We are hanging here.......

Hi-

That is a kernel panic.
Kernel panics are caused by failed or incompatible hardware, an corrupt or incompatible system files/drivers.

Was the software update completed, or was it interrupted?

You may need to reinstall the system to get it back if the cause is software.

Hardware, well, first run the Apple Hardware Test disc.

Where do i find the Apple Hardware Test disc?

It is on a disc within the original shipping software disc set.
Insert the disc, and hold C while starting.

And if it is a software problem and i need to reinstall the system:
Does that mean:
1. I loose all my documents, work, etc.?

With an Archive and Instal/Preserve User Settings, No.
This option may not be possible, and an Erase and Install would remove all old files.

Do you have a backup external drive?
If a Time Machine (Leopard) backup exists, you could roll back to before the last update, in case of a bad/incompatible item in the update.
In the case of a Reinstall, the system may be restored using the TM backup.

If just an external firewire drive, does it have a bootable system copy on it?
Will the machine boot to the external )use Option key during start to bring up the Startup manager).

If no backup, well, I won't rub your nose in it.......

2. can i do this myself, even if i have limited experience?

Yes.
http://support.apple.com/kb/HT1545

3. I tried to reboot from the installation disc 1 and nothing happened, it just whirred alot and spewed out the disc with no change.

This is not good.
It may be a hardware issue, which will require a trip to a Mac repair center.

4. If the fan motor, i believe it is, runns loud alot, what does that mean?

There is power, and the system defaults to full on fans in the case of system failure, to protect sensitive parts from heat damage.

For now, follow the steps outlined in this article:
http://support.apple.com/kb/TS2570

Perform each step (do it again if that is the case) in order.

If you cannot boot to the OS install disc, use fsck instead.
http://support.apple.com/kb/TS1417

1- Boot to Single User Mode holding Command and S keys while starting.
2- At the command-line prompt type:

/sbin/fsck -fy

3- Press Return.
fsck will go through five "phases" and then return information about your disk's use and fragmentation. Once it finishes, it'll display this message if no issue is found:

*The volume (name ofvolume) appears to be OK*

If fsck found issues and has altered, repaired, or fixed anything, it will display this message:

*FILE SYSTEM WAS MODIFIED*
Important: If this message appears, repeat the fsck command you typed in step 2 until fsck tells you that your volume appears to be OK (first-pass repairs may uncover additional issues, so this is a normal thing to do).

When fsck reports that your volume is OK, type reboot at the prompt and then press Return.
Your computer should start up normally and allow you to log in.

Good luck, and I will be looking for your update!
🙂