I had a similar problem when installing Windows 7 on an old laptop with Ubuntu on it. It just refused to boot from the CD.
Googling often gives you results like: press F8 when in BIOS, but I don't think that really helped.
A solution that should work is creating a boot disk (on a floppy), but this requires you to have a floppy drive. Care to update if you have it?
If you can't start the XP installation by booting from the CD-ROM, it is possible
to start the installation using a Win98 boot disk.
(Floppy needs to be set as first boot device in the BIOS)
Boot the computer with a 98 boot disk.
Choose the option:
Start computer with CD-ROM support.
When you get to the A:> prompt insert the XP cd.
At the A:> prompt press ENTER after typing each of these three lines. (Replace the X with your your CD-ROM drive letter).
If setup does not detect Smart Drive
Press ENTER to continue without Smart Drive.
Once setup begins remove the 98 floppy disk.
Though I think you should be able to make a boot CD as well.
Another solution for forcing the CD is simply unplugging the hard drive, you know for sure it's not going to load Windows then. As soon as it launches the installation you just plug it back in and the installer should recognize it. However this assumes you actually manage to boot into the CD like that...
Yet another suggestion: try the Windows XP CD for booting. If it works go into recovery mode, where you can get to the command prompt. From there you could get switch the CDs and load the executable from the Windows 7 installation CD