I tried installing 10.1 on an old computer (Pentium II, 400Mhz, 64MB RAM, 8MB Video RAM) and it gives me a "Fatal Error when loading Stage 2" I went into the text output view and saw the following line (or something very similar to it): Copying-->/etc/resolve.conf. File missing". I am installing off of the DVD 10.1, and using a Samsung Combo drive to play the DVD. Why is this file missing?

Did the DVD iso file pass the md5sum check?

I am not sure how to check if it passed the md5 test (can you tell me how?) , but I made a mistake in my post. The missing file is /etc/resolv.conf

I tried installing again, and the kernel output said that there were bad sectors on the media. I am assuming this refers to the DVD? I would like to do the md5 test though.

just run the md5sum program on the .iso file;
"md5sum [filename]"
After a minute or two, it will give you an output, a bunch of numbers and letters. check this with the md5sum for the dvd you downloaded at one of the mandrake 10.1 mirrors (It will be in the same directory as the .iso file on the mirror and will be labelled md5sum dvd, or some such). If the sequence of numbers and letters do not match, you probably have a corrupted file.
check also "man md5sum"
Cheers

Actually, it's
"md5sum -c [filename]"
to check
I think- it's a while since I've done it. check the man page to be sure

I figured out how to do the md5sum. They match perfectly. Their must be another problem. Could it be a bad burn session? Why else would the file be missing? Or is this an external file that is needed?

I guess it could be a bad burn, I can't think of much else. It seems like a strange file to trip up on - I think it's one of the internet configuration files where the mandrake internet or network daemon looks for nameservers and stuff.
I would either try another burn, preferably on a different burner, or, I would try to install a different distro, using the same burner as you've just used on MDK 10.1

The problem was not a bad burn. I tried burning a copy of the first CD of mandrake, and had the same error. Today I formatted my harddrive in Windows (FAT32) and tried installing Linux again. As I said earilier, the kernel cannot use my RAM to install, because it is not enough, so it wants to write to the harddisk. Unfotunately, the harddisk was formatted in Windows, so the kernel detects "compressed data on sector 0" and cannot write properly. So, how can I install Linux when it needs to write to the harddisk but can't before it installs?

Doesn't sector 0 contain the file allocation table? If this is screwed up, I don't know really what to do, but I'm sure someone else would. For now, I'd advise trying to boot off a live cd, something like Knoppix 3.7 and seeing what you could do from there. At least you could try partitioning your drive from there with linux and linux-swap partitions (see cfkisk, fdisk, qtparted etc)
Take this advise in the right spirit though, I said this is what I would do, and that is true. I'm also prepared to spend hours dicking around with this kind of shkt to get practically nowhere.

Good luck!