Bootcamp: installer disk could not be found - but MAC desktop can see it

Hi,
I have an iMac intel - 17" 1.83 GHz that I put together from a box of junk. Mechanic friend took it all apart, don't ask. Installed a new hard drive of 1 terrabyte. The internal optical drive does not work so we got a new Iomega optical drive that works just great.
We want to run Windows XP Pro on this iMac - and after updating all of the software in Mac (OS 10.5.8), and running Bootcamp set up assistant, partitioned the drive to 500 GB MAC; 500 GB PC, got this error message saying that the Windows XP installer disk could not be found.
The disk appears on the desktop. I can click on it and see all of the pc files in it. I clicked on a couple of the files and got a simple text document of gibberish. But the set up assistant in Bootcamp still doesn't recognize the disk. So I have been unable to install Windows.
The disk itself is a burned copy from my university that gave me a full license for Windows XP Pro, SP 3. It's 32 bit. And it shows up as an install disk when I pop it into a PC.
I've run Disk Warrior and Disk Utilities to repair permissions and to check that the new hard drive is ok...and it's all set.
I wonder if this is because of the external dvd drive that I'm using. I can use my Macbook Pro and get the imac into target mode. But don't know if this will have me continue to bark up this tree.
Has anyone had success with the same kind of problem that I'm not facing? Thanks much in advance.
Sheila

I too got a version of Windows 7 64 Professional from the the Microsoft Software Distribution Network through Uni. I burnt the iso file on a PC to a DVD with power ISO and then tried to use it as the install disk. After some umming and arrhhing Mac OS X recognised it, the installer started, allowed to select language etc, then suddenly a box appears announcing that a required cd/dvd drive device driver is missing.
I have rang up apple support and they are pretty much saying it is a disc quality issue, but I have checked all the disc drive regimes and permissions and they all seem to be fine. I have also done it with multiple brands and a number of times, everytime the same message returned. All the latest firmware has been downloaded. One thing that was briefly mentioned by the guy at Apple support was that there was the possibility that it may be the "logic board". So the previous poster may be right. They said this was unlikely, but everything is possible. The drive works for everything in the OS X side though, so has pretty much stumped me and the Apple support people. I think the only option is to take it to an Apple shop and let them see it for themselves, not really an option for me as I need the Mac Book to write my dissertation, due in about three weeks so can't afford to lose it.
Sorry if I have slightly "jacked" the thread, but the issue sounded pretty close to mine. Any resolution or insight into what might be the issue would be amazing.
Regards,
Duncan

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