Re-Loading OEM disks

I'm a new member and I hope someone can help, getting very frustrated. I'm only "geeky" enough to be dangerous, but never had this type of problem; I have a Gateway 7330GZ laptop, the problem started when it quit recognizing the DVD/CD drive. I tried all different suggestions to get it corrected with no luck. I decided to do a recovery from the hard drive. Everything went smoothly until it restarted after the recovery and it hung up before completing the set-up. I had to turn it off and restart and it jst keeps hanging, but not necessarily in the same place before it gets everything set-up. It does a drive scan because of the way I turn it off and the drive tests fine.

Next I went to the OEM reinstall disks and it does the same thing. However, one thing unusual I did notice is the drive scan is showing it's scanning drive D: instead of C: and I don't know if this is what's causing the problem. I'm thinking it's trying to reinstall all the OEM software and XP operating system on the recovery partition which would not have enough space. Anyone have any ideas??? Any help would be greatly appreciated. I've reinstalled operating systems numerous times before, but never had this type of difficulty.

P.S. I'm using a USB external CD drive to load the disks since the laptop drive isn't being recognized.

 

I'd remove the on board drive from the laptop. If it is faulty, it just might be causing the hang.