Did it mention something about a firmware or EFI password? That's a really secure password which prevents you from using a startup DVD. Normally this is only set for higher security reasons by people who know what they are doing. There used to be tricks for resetting even it on older Macs but I don't know if they work on Intel models.
Edit - Oh, I don't think you should have held down the shift key, just the C key. Maybe it isn't an EFI issue after all.
Mac OS X 10.6 Help: If you forget your administrator password - http://docs.info.apple.com/article.html?path=Mac/10.6/en/11627.html
Hi Limnos...thanks for writing back.
No, nothing about firmware or EFI password.
I tried just the "c" key without shifting and that gave me the login screen too.
I just tried it again: Put in the disc, hit restart, held down the shift/C when I heard the tone (as the directions say), let it go when I saw the spinning gear and the Install window popped up. I took a chance and hit install, until I saw the utilities button, hit that but, again it required a password which i don't know. Yikes!