If the Custom>Drive Options are greyed out then it almost always means the disk is running from WIndows and not booted.
Set DVD drive first to boot in BIOS setup as shown here: How to Boot your Computer from a Bootable CD or DVD
Or use the one-time BIOS boot menu key given on first boot screen. It can be frustrating trying to help someone do this via phone, I know.
Always try install in AHCI mode first. Reset your BIOS to optimal defaults then check to be sure.
Other tips for getting a perfect reinstall, which you can image after setup so it never needs reinstalling: Reinstalling Windows 7