Well as long as your CD-ROM is set before your hard drive, you're good to go...just watch for the "press any key to boot from CD" while your computer is posting.
You are getting a disc failure because you cannot make your CD-ROM the master drive, because it is not...it is only the boot device. Don't worry about your master/slave settings, only concern yourself with your boot order. Leave your CD-ROM wherever it is installed on your system...it can be secondary slave and will work fine, don't sweat it.
What motherboard are you using? It would be a lot easier to be more specific if we had more info...
Before you post again, take a deep breath and relax!