Startup from the system cd, then try using Disk Utility to repair your disk and repair permissions, that may help. If not (and if you haven't already) then get your data off the machine (perhaps using target mode; connect it to another machine via firewire, then startup the dubious machine with the T key held down, and its HD will mount on the other machine), then format the drive and start again.
Alternatively, if you have a friend with panther as well, try installing from their disks (you own it too so it should be legal), if it works, you know the problem is with your disks not your computer.