Trying to reformat but Gray screen stalks me

Hi everyone - thanks in advance for reading and your willingness to help.
My goal is to reformat my machine and start fresh...
I've reformatted many Macs and this is the first time I come across this issue. As a side note, I purchased the digital download of Lion and Mountain Lion so I don't have a physical CD of these OS's to initiate a reinstall/reformat - the best I could find was my last physical purchase which was 10.6.
I can start my MacBook up just fine. I insert my installation disk (for OS 10.6). It recognizes the CD on the desktop.
I click "Install Max OS X"
It reboots and begins to boot off the CD
MacBook gets to gray screen
CD stops
Stuck on Gray Screen
I can remove the CD and boot right back to my desktop just fine but I can't get to the disk utility to reformat. I tried disk utility in the OS and it obviously wouln't allow me to erase while logged in.
Any suggestions? Most obliged!

Install or Reinstall Lion/Mountain Lion from Scratch
Be sure you backup your files to an external drive or second internal drive because the following procedure will remove everything from the hard drive.
Boot to the Recovery HD:
Restart the computer and after the chime press and hold down the COMMAND and R keys until the menu screen appears. Alternatively, restart the computer and after the chime press and hold down the OPTION key until the boot manager screen appears. Select the Recovery HD and click on the downward pointing arrow button.
Erase the hard drive:
1. Select Disk Utility from the main menu and click on the Continue button.
2. After DU loads select your startup volume (usually Macintosh HD) from the
      left side list. Click on the Erase tab in the DU main window.
3. Set the format type to Mac OS Extended (Journaled.) Optionally, click on
        the Security button and set the Zero Data option to one-pass. Click on
      the Erase button and wait until the process has completed.
4. Quit DU and return to the main menu.
Reinstall Lion: Select Reinstall Lion/Mountain Lion and click on the Install button.
Note: You will need an active Internet connection. I suggest using Ethernet if possible
            because it is three times faster than wireless.

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