Were you originally trying to install from within Windows? You can't do that to install a 64-bit system on 32-bit Windows - which would explain the error message.
You have to, as you have tried, boot from the DVD to install. I've no idea why the Windows 7 DVD won't boot on your PC. I can only think that that particular DVD drive and that particular DVD don't want to play; it happens. I have some DVDs that work fine on my laptop but throw up errors on my desktop.