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All true, but you can use the existing installation of grub to boot the installation kernel and initial ramdisk. copy the kernel and initrd files from the pxe directory to you boot directory and edit your grub.conf file to something like:
title FC3 install root (hd0,0) kernel /{kernel filename} initrd /{initrd filename}
I would interested to hear if the above grub solution works. Do we know whether grub had been installed in the MBR. I am interested in the fact that the machine can't boot from the CDROM even though the BIOS says it should. How does the BIOS know the difference between the CDROM to boot from and a hard disk. If the BIOS says it can boot from the CDROM it should be possible. I assume booting does not happen from any CDROM. I would look for a hardware person to fix this. I would bet something is wrong with the configuration of the machine.
Sure something is wrong with the configuration somewhere. But using grub to load the new installation media works too - if you have a working grub in the first place.
The next question is: could you run grub off a floppy and load a kernel on a cdrom? If that were the case, then I bet it would have been done by now.
Another solution is to use grub and load the installation meda from a server. have a look at my writeup at: http://www.hp.uab.edu/~ed/grub-net
ed