stop trying to boot from CD..
make a usb boot drive and install windows from that.. much faster, AND much more reliable.
Use the software below...
http://download.cnet.com/Windows-7-USB-DVD-Download-Tool/3000-18513_4-10972600.html
when running it.. it will require the "iso" file of your Windows 7 dvd,
It doesn't care if the iso is pirated, which i'm sure you're using. 
If you need to CREATE an iso from an official-disk... then download "imgburn" on a working computer, and tell it to create an iso of your install CD.
Yes booting from a flash drive is faster but it is not more reliable. In fact DVDs and CDs are rated to last 50-100 years, where as flash drives are rated for 1 mill write cycles (or 10 years of average usage). Besides, while some of those USB image makers may work, I've found loads of them that almost never put OSes on a USB properly.
dude, where've you been. Nobody installs from DVDs anymore...
Reliable, as in for the "install" process.. Copied Windows DVDs are notorious for read/write errors. this was part of the design..
The Flash Drive is not meant for archive, this is true, but I don't see your point, as you wouldn't be using windows 7 in 50 years. 
I work in computer repair, and I've installed windows 7 at least 200 times from DVD(s) just fine. I have researched the history of optical media design somewhat (promarily from a materials engeneering background), and I disagree that having errors was a design goal. I do keep a 16Gb flash drive around with windows 7 all-in-one that I use mainly (the extra space is filled up with drivers) but it is often more convenient to have optical recovery media around to reload a system with, should the need arise.
also, there's no need to rely on third party tools to create bootable media for windows 7. There exists a utility already on the CD (or already on your ISO from digitalriver) that can make your flash media bootable (for windows 7). Below is the guide I followed when I first tried this
http://www.maximumpc.com/article/howtos/how_to_install_windows_7_beta_a_usb_keyThere's no need to pirate windows 7 disc images, as they are available legally from microsoft (via digitalriver) Remember to write down your activation key. (just search for a list of windows7 versions from digitalriver, or post what windows version you have, and someone'll find a link I'm sure, or PM me or whatever.)
I remember looking up the projected lifespan of different media for archival purposes, and the most reliable information I saw does not recommend most optical media past 20 years. I have had flash drives fail (to various issues, I suspect too much use to be chief among them) over the years, too. I buy flash storage like there's no tomorrow, and I can't have too much.
@OP: I didn't see any specifics, but what sort of computer are you using? Many Dell, HP models will have onboard diagnostics you can run (usually F2) from a diagnostic partition. Failing that, I recommend you get some test/recovery tools. Knoppix is good, but you can try some more specialized ones. Provided the drive is okay, you should be able to easily recover files to external media using linux. If the drive hardware is okay, but the filesystem is not, you can sometimes rebuild the partitions. (beyond the scope of this post, but I've had good luck with cgsecurity's photorec & testdisk) If the drive itself is failing, you can sometimes recover data.
What I recommend is to do a "spring cleaning" by backing up all your files (if you haven't done it already) and then reloading windows. Transfer your backup, install programs and be happy.
If you want to try and recover windows itself, there are some ways, press f8 while starting, to bot into windows safe mode, or let the stupid "startup repair" to complete, open the terminal, run an sfc (look up how to do an sfc scannow in your search engine of choice)
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this is the message iget
loading operating system ...
a disk read error occurred
press ctrl alt del to restart
this happend all 25 times i restarted it.
Based on the above, there's a chance your drive has failed. Is it still in warranty? I recommend backing up your files and testing the HDD (if it has SMART, the SMART extended selftest is good. This is runnable through the GNOME program Palimpsest (now gnome disk tools or something like that) which is a linux application you can use. I have an ubuntu 9.04 CD that I have sitting around that I have been using for running it)
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This is off-topic, but with flash and optical storage both having issues, the best way to run your live linux is with the -toram cheatcade. This will take a bit longer, as it loads the entire media to RAM (usually about 750 mb) but afterwards things are very fast, and you can remove the media. This is only recommended if you have 2GB+ of RAM anyway. Press TAB to enter the bootloader and add the -toram cheatcode to the end of the list of boot codes / options. This isn't necessary, but it's useful for a lot of situations I run into at work.
