Boot from your installer:
Booting From An OS X Installer Disc
1. Insert Leopard Installer Disc into the optical drive.
2. Restart the computer.
3. Immediately after the chime press and hold down the "C" key.
4. Release the key when the spinning gear below the dark gray Apple
5. Wait for installer to finish loading.
If the computer spits out the disc, then you have a bad or dirty disc or a defective optical drive.
Quick question, if you put the installer disc in your computer d; does it mount to your desktop? One thing Im mot seeing in your post is that with the installer disc mounted on your desktop that you click on the big X to install.
this changes your startup disc to the cd and it doesnt require you to hold down the c button. It is also good to check your hard drive in Disk utility to make sure its verified as stated in an earlier reply. If all is good therethen click the big X on your mounted dvd volume on your desktop. If it reboots to the cd then you should be good to go.
Also Dee make sure before you start to go into your system preferences to the little lightbulb ie Energy saver and be sure to set both to never and uncheck put hard drives to sleep whenever possible.