Reformat using external HD

What are the steps for reformating using a external HD? I have the iso on the external already. The mac wont start up completely, it freezes at a grey screen but i can get to the terminal. I dont know the exact os i am running at the moment but i know its over 10.4 and im trying to reformat with snow leopard 10.6. Also dvd drive doesnt work. I dont know to much about macs, so please try to explain steps well please. Thanks for the help.