Issues installing OSX

Hey guys,
first post here,
got a late 2006 imac today
Specs:
2gb ddr2 ram
500gb wd harddrive
intel duo core 2.0ghz

Im having a few issues installing snow leopard, i fitted a 500gb western digital harddrive and its all gone back together perfectly, im currently running osx tiger 10.4.4 but have a retail disk for snow leopard, ive been getting an error saying 'osx can not be installed on this computer, must install osx 10.5 or later'.

after some reading it has become apparent that i should do a clean install seen as i have no files as its a new harddrive, the harddrive is already partitioned.

the issue im having is that when im told to hold in the option key or c on startup apparentley i should get a choice of what to boot from, instead its opening the cd rather than booting from it, i know this because ive seen people boot from the same osx on the same computer and instead of the error it allowed them to install straight onto the harddrive.

just wondering if you guys have any ideas?

Thanks
Arran

 

Its a wired keyboard, and by format the drive i have gone into disk utility, erased the 500gb western digital drive and now i have a drive called Macintosh HD.

Arran