You must set your DVD drive to be the first boot device.
If you do not do that, the PC will not boot from the installation disc and you won't install Windows 7.
I would buy a retail version of Windows Home Premium. That should include 2 discs: one for 32 bit and another for 64 bit, along with a 25 character Product Key.
You can install either 32 bit or 64 bit, but ONLY ONE AT A TIME. The Product Key works for either version.
Since you have only 2 GB of RAM, I'd install 32-bit. If you later upgrade to 4 GB of RAM, you might want to change over to 64 bit, using the other disc in the retail package.
The more expensive versions of Windows (Professional and Ultimate) have more features, but there is not much chance you need those features. The more expensive versions are not "faster" or "better". They just have some extra features.
Here is what Ultimate has that is not available in Professional:
BitLocker, BitLocker To Go, AppLocker, Direct Access, Branche Cache, MUI language packs, boot from VHD.
Here is what Professional has that is not available in Home Premium:
Domain join, Remote Desktop host, location aware printing, EFS, Mobility Center, Presentation Mode, Offline Folders, Group Policy (GP) controls, advanced backup, XP Mode, support for 192 GB of RAM, and support for 2 CPU sockets.
If you don't know what those features are, don't buy Professional or Ultimate.