Can't install OS on new HD

This is my Mac:
http://www.everymac.com/systems/appl..._1.25_mdd.html (2 gig ram)
I bought it surplus and had to by a new HD for it. I purchased a Western Digital Caviar Blue PATA 7200 rpm 320 gig drive. I installed the drive powered up the unit, inserted the install disc in the drive powered down and then powered up again. After the chime I held the C key down until the apple appeared. It then goes to a grey screen that has a refresh arrow on the left, the install mac os in the center and a right pointing arrow on the right side.
Here’s where it gets crazy…I can click on the refresh or right pointing arrow, but not on the Mac OS install button. If I click on the right facing arrow I go to a kernel panic window that tells me “unable to find driver for this platform Powermac 3,6.
I have reset the PRM already with no change. I need some help please. I’m trying to install os 10.4.8 AHT version 3A188 Disc ver. 1.0 from discs that were given to me. The discs are grey Mac discs that say Mac OS X install disc 1 & 2.
Why won’t this install? What can I do to get an OS running on this computer? This is my first Mac and it’s very frustrating……please help me learn.