Grimhowl said:
Strange as it sounds, I'd run check disk on your hard drive. In one case at the shop where I work, we had a guy come in who was complaining of a similar problem (he couldn't install anything from a disc, though we hadn't tried downloaded software) and the issue was a cluster of bad sectors on the hard drive. Whenever he tried to install something, it would try to write to those sectors and then would bomb out.

We ended up having to replace the hard drive, but it fixed his problem.

Took us awhile to track that down, never seen that happen in that particular way before.

Just a thought.
Hi! ^_^

I'd the same problem in the job where I work around 2 years ago and also was a bad cluster and, for the client's luck, that cluster was easily recoverable using HDD Regenerator.
I think that if Windows installed without problems from DVD drive, it must not be it's problem. Before performing DVD drive's checks you could try running MemTest86+ for your RAM and HDD Regenerator on the hard drives that you use for games and Windows itself. Also... it could be a virus/malware?