Hum well if it is recognised in the BIOS you should be able to choose it as the first boot, and in any case if the hard drive is blank (unallocated) and there are no USB sticks in the machine should automatically look for a boot source and the DVD being the only one there it should boot from it and begin the install.
Now the Windows as you replied to Layback Bear was from Microsoft via where because I wasn't aware that they were still selling it.
Plus as layback has said does the optical drive work with any other boot source disk? for example you could try this if you have access to another machine.
BOOTABLE UBUNTU
Make a bootable Ubuntu disk
Get Ubuntu | Download | Ubuntu
Set the BIOS to boot from the optical when the machine boots it will show you a screen with TRY or INSTALL > select TRY not INSTALL
When it is finished - it takes very little time you will get a screen like in the pic .
But
do not click on install just TRY it will boot into it's own environment and the machine need not even have a hard drive in it so don't worry that it will affect that.
Now if this boots then it is the Windows media you have being wrong in some way because I must admit I have never seen a "set up button" either. If it does not boot then the optical drive is either bad or may need reseating/replacing and by the way the machine has an internal optical drive?