Sounds pretty old to me. A 'Serious disk error' probably indicates that it needs replacing. Try a Maxtor 20Gb or equivalent Western Digital, with an 8Mb buffer (also referrred to as an 8Mb drive-cache) which runs at 7,200 rev/min and you should have a much better machine.
20Gb is about as small as they make these days.
If you are not sure that the CD is really clean I just wash them in luke-warm water with a couple of drops of mild soap solution using a soft sponge and then dry them with a clean linen cloth.
That usually prevents there being any read errors.
On an older computer it is worthwhile re-seating the RAM and making sure that the cabinet is clean and dust-free before undertaking a major re-install.
Just take proper anti-static precautions before you touch anything.
RAM Reseating & Fitting PDF File