Maybe the CDROM unit is faulty, or the disk itself is faulty. Can you boot from that Install CD on another machine? Is it possible to connect your optical drive to another machine and boot from it there? Although your BIOS can detect the presence of the optical drive unit, it can't test for its proper function until you try to read from it.
My guess, I'll try burning another install if it doesn't work i will try installing Ubuntu if all of the above fail I'll buy a new CDROM.
;( I'm never gonna be able to fix this before Diablo 3 comes out
Anyway, do you have any knowledge on CDROM? What should i be looking at before buying one?