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Yes, certainly a hardware problem, perhaps the DVD drive is failing.
Idea one. . .go into notebook BIOS and disable ALL unneeded hardware (USB, COM, LPT, LAN, 1394, WiFi, sound, whatever it will allow), and try the install again.
Idea two. . .boot from a different CD and run chkdsk.exe to look for disk errors.
Last resort. . .pick up a notebook IDE adapter, hook the notebook drive to another system, create a 700MB partition, and copy the installation CD to that partition. Install from HD instead of CD.
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