Hello!
I want yum to also look into F8 DVD thats is already mounted in /media/Fedora 8 i386 DVD so if the packg is availabe there and no newer version is available on net so i can force it to install it from the DVD to save my downnloding time.

I tried it by opening Add Remove Software and go to Repository Manager and add a new repository and give the following path

file://media/Fedora 8 i386 DVD/repodata

i also tried with this path

file://media/Fedora 8 i386 DVD/repodata/repomd.xml

but the system couldn't fetch the repomd.xml file. How can i add my local dvd as a repository in yum?

On Fedora 8 there should already be a Fedora-install-media.repo file in /etc/yum.repos.d. To enable it simply open that file in a text editor and change "enabled = 0" to "enabled = 1" (no quotes). Note that yum might choke if the DVD isn't in the drive the first time you run it after doing this.