Try placing the installation softare in the drive and restart your computer holding down the 'C' key. This should boot directly off of the CD where you could reinstall the system.

I can't see how this won't load due to an operating system error because you're never really touching the hard drive when booting directly off of the CD. So theoretically it shouldn't matter if there is a corrupted OS or no OS at all because you will wipe it clean anyways.

In any case, a software program I highly recommend to fix hard drive errors is called DiskWarrior.