Can you boot into Safe Mode at all? It would be nice to know if the operating system is completely borked or not at this point. Just hit F8 and go to Safe Mode...nothing else.
To use the restore disk, you'll need to boot the system with it. You'll also need to have the computer set up to boot from the cd/dvd drive first, rather than the hard drive. If that isn't the current configuration, you'll need to change that in the bios.