This is while started up from the optical drive with the installation disc, while running the Installer, correct? Visually check the DVD, to make sure there are no scratches or smudges interfering with access.
Also, how much RAM is installed in the iMac? It needs to have at least the minimum required for Tiger, which is 256MB. More is definitely better.
Probably not related to this error message coming up, but since the hard drive came from a Dell PC, I'll mention it. You probably reformatted it using Disk Utility, after starting up from the installation disc. When you reformat (Erase) it for use as a Mac startup disk, you need to select the Device (the hard drive) in the Disk Utility sidebar. You may see a Volume indented below the Device. Select the Device, not the Volume. If you select the Volume, the Drive may not get the proper partition scheme for use with a Mac (retaining the partition scheme used with Windows), even if its disk format is Mac OS Extended (Journaled).
The correct partition scheme for a PowerPC Mac is called Apple Partition Map (which should be used by default with the Drive selected). If this Mac supports direct booting into Mac OS 9, and you want to install the Mac OS 9 system along with your Mac OS X system, enable the option to Install Mac OS 9 driver.