I had Win7 retail installed on a desktop. But WUpdate wouldn't work. Nobody could fix it in 6mths. Offline updates here need SP1. I have a DVD with SP1 that I used on another machine. I used it to install on the desktop. Try 1: Format C: Install, all fine to 'copying files' part. Went away, came back 1hr screen black. All dead. Reboot, try again. DVD loading, PC beeps crazy Reboot, turn off all o/c, try again. DVD loads, choose language, 'Install now' DVD asks me for DVD driver. Can't continue install. DVD is sata, I have no idea what's going on. Why does it want a driver?
Sounds to me like the SP1 DVD from the other PC is a recovery disk not an installation disk. Check the stickies and get a DVD image straight from MSFT. That will tell you if its the DVD or the PC thast the problem.