In order to rule out most software issues try booting into Safe Mode by holding down the shift key immediately after you hear the startup tone when you power up the system. For more info see the following articles.
If the issue goes away when you boot into Safe Mode then it indicates you may have an extra or corrupted piece of software that is not behaving well.
Can you provide more information about the model of iMac that you are using and the version of OS X that is installed? Did you install any new software or utilities around the time that the issue began that might provide us with some clues?
It has the latest version of OS X Snow Leopard
When i get to the login menu in Safe Mode, it says my password is incorrect, so I attempt to reset my password with my installation cd. However, when i hold down "C" on startup, after a while it ejects the installation CD itselfs, and brings me to the regular Login Screen that goes to Black when I attempt to log in.
By any chance did you or someone else ever set up an EFI firmware password on this system? It could explain why your system won't boot from the optical drive when the Install DVD is inserted since many of those snag key features are disabled when the EFI firmware password is enabled. It would most commonly be used in a school environment. Here's more information on the firmware password:
If you have an EFI firmware password and can't remember it you'll need to reset it before continuing. A quick Google search will turn up methods for performing a reset.
If you don't have an EFI password set try this. Instead of holding down the 'C' key, hold down the option key instead to load the system picker. Make sure the Install DVD is in the optical drive. Does the Install DVD appear as one of the boot options? It may take a minute for it to appear once the hard drive icon appears. If the Install DVD never shows up, and you don't hear the optical drive making any noise then you may have an optical drive problem too.