Windows 7 not giving me install options

Hi all, I recently built a new computer, this is not the first one I have built but it is the first time I have had problems with the operating system
The build:

MSI P55-CD53
Intel i5-750
ATI 5850 GPU
2 x 2gig 1600Mhz RAM
Sony Dual Layer DVD Drive
500Gb Hard drive
750W Powercool PC750UM, Modular

All is set, after a slight issue getting anything on the monitor (I put the RAM in wrong slot, rookie mistake) all looked to be going well, turn on, get to Bios and set time etc.

I then put the windows 7 DVD into the drive (note: It is the upgrade version but everything I read says I can use that to boot and install). When it boots from the DVD drive, instead of a nice blue screen with 'Setup' and the option to format the hard drive (like XP does) it went straight to a black screen with a white bar at the bottom saying 'Loading Windows' (is this how windows 7 does it?)this fills up, sometimes once or twice, then goes to 'Starting Windows' where it then freezes usually with a dot or two on the screen.

I decide maybe I read wrong and I cannot boot from the upgrade disks, so, I put in my windows XP CD (I wanted to avoid installing an old OS first as it had seemed possible). This did get to the blue screen I am familiar with. I picked the first option (Quick) and it got to 20% rapidly then froze. So, I restarted. This time I went with the slow second option. THe first time it loaded to 100% then froze. The second time it reached 100% then restarted the computer. Upon restart if I did not boot for the DVD it said 'Error loading operating System'

Does anyone know what the problem may be? I saw elsewhere that some people found it was the PSU, but all who had that issue seemed to be using an ASUS mobo and Corsair 950 PSU.

I have seen it mentioned that it may be a compatibility issue and in Bios I can set the SATA drives to compatibility mode or something, I had a quick look but could see no option there.

I wasn't sure if I should post this here as it is a system I built, or in the Windows 7 area, though as I have an issue with XP to it could also belong there!

I am beginning to tear my hair out, any advise is appreciated!

Many Thanks