Ok, Before going any further I suggest reseting both your PRAM and your PMU.
Rest PMU:
http://support.apple.com/kb/HT1431
Reset PRAM:
http://support.apple.com/kb/HT1379
Now, I'm not sure if the c-key is recognized as a proper boot command after mac-boot from firmware.
So the proper procedure for booting your Mac from DVD/CD goes as such.
1. Power on mac so that you can put the DVD into the drive then poweroff.
2. Power on Mac and immediately press and hold the c-key until you get the OSX installers Language screen.
3. Select your language then continue.
Now to run DU Disk Utilities from DVD.
4. The next screen will be the OSX installers Welcome screen, from the top menu bar select Utilities then Disk Utilities.
5. In DU, from the left pane select your drive. In the right pane select First Aid tab.
6. From the First Aid pane select to run "Repair Disk". If "Repair Disk" comes back with errors, run it again until no errors found.
7. Once "Repair Disk" is complete with no errors then select to run "Repair Permissions".
8. While in DU First Aid, Note at the bottom the drives S.M.A.R.T. status it should read "Verified".
If this does not fix the problem then you need to get an external drive with OSX loaded on it or another Mac (a friend maybe)so that you can try booting your Mac from one of them to verify that you don't have logic board problems.