A disk read error occurred
That error indicates a hardware issue with the hard drive. It might be just a bad spot on the hard drive. Here is a procedure to workaround this problem.
Using a disk partition program, erase or delete all partitions on the hard drive. Next, divide the drive into partitions. The intent is to isolate the bad spat into on small partition. This can be time consuming. I would recommend:
Partition 1 primary, as only 500mb. Use a non-windows format. Linux.
Partition 2 primary, active about 30 to 40 GB for Windows.
Partitions 3,4,5 logical part ions of any size or type. Recall that you can re-direct My Documents to another folder on another partition, so you still can use most of the drive space. Keeping Windows inside a 20 or 40 GB area reduces the like hood of a system file being on a bad sector.
The intent is to force Windows to install on partition 2, which must be the active partition. Partition 1 is not reliable.
The assumption is made that the start of the hard drive has a bad scratch that covers more than just one sector. It can not be repaired. So you install windows away from that area.
This is based on anecdotal and empirical studies. No warranty.