Since the Windows setup DVD is also freezing, i suspect a hardware failure. Please follow the below steps.
1 )We need to remove some hardware components. Static electricity in our hands can damage the components inside system. So either wear a glows or touch you hand in an unpainted part of the metallic case of system (to discharge static electricity)
2 ) Remove one of the 2 GB RAM stick and try to boot. If not success, swap the RAM with previously removed. By plugging only one RAM at a time, we will know if one of them is faulty.
3 ) If the above step fails, remove the graphics card and use the on boad VGA for display. Check if the system can boot now.
4 ) If that didn't helps, remove the power and SATA cables from hard disk. Now boot from the setup DVD to test if the system can successfully boot up to the partitioning section.
Report the outcome of the test.