This happened to me also on both my new iMac and MacBook when I tried to boot with my original 10.5.0 disc - I thought at the time it was something wrong with my disc, but apparently not.
You should be able to install it from your older Retail disc. The iMac won't list any discs that it can't boot from. Just install all the updates once you finish installing.
You need retail disks with 10.5.4 or later for this machine. Current retail disks are this as far as I am aware, although the ones that come as part of the Mac Box Set are 10.5.6 and will work with all currently available Macs.