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Yes you can wipe it.

Get it to boot from the cd again, but pick new install instead of repair.
When you get to the partition section. Delete the partition, then create new partition.
When...

Well, atisgkaf.sys is the ATI AGP driver.. (video) I know that much...
I'm really supprised it won't boot to the CD. I've never seen that fail!

You need to somehow make that work... try digging...

Did you go into the bios and change the boot order?

When you first turn on the PC.. it will say somewhere like hit F2 or F12 or etc to enter setup
Hit it...

In set up look for boot devices....