On the failing machine, I can boot from external CD but after choosing the software installer option, I get "LOADING" showing in the bottom left corner of the screen for a while before it drops out to a blank black screen with a single '#' prompt
This can sometimes be from a bad file download, or bad cd burn. However in your case it would seem you actually have a drive that cant read the data.

Glad you got working with the USB device, but you may still want to retire the cd drive.