I don't really know what has gone wrong, scuzzman, but this is what I think:
The setup program is made to ask for the cdroms and doesn't automatically look on the harddisk for the packets.
I think it is possible to install from harddisk, but I don't really think you can do it with the standard setup program.
If I were you, I would totally wipe out the linux and swap partitions (let the Windows partition alive if you need it). Afterwards, put all the partitions together (Windows + Linux + swap).
When done, from windows, remake the partition on which you will install Linux.
Now you have two partitions: a Windows partition and an empty one to put Linux on (The swap partition should normally be created in the Linux setup itself).
The first thing you should do now is to look for a tutorial or HOWTO on the subject (installing from harddisk). When you think you know what to do, try again and hope it will work fine this time.