It's most likely trying to boot off the hard drive which apparently doesn't have an OS on it (or the MBR is screwed, which really doesn't matter if you're trying to put another OS on it). You'll have to go to the BIOS settings asd enable booting off the CD if possible - if the BIOS doesn't support booting off a CD, getting the installer running is a bit trickier (though still possible).
No, I'm fairly sure the current Linux kernel won't fit on a floppy no matter how hard you try... at least Slackware abandoned the use of floppies for this very reason (and even before when floppy booting was supported, the later versions used to require several just to bootstrap the system). You're absolutely certain that your BIOS doesn't have an option for CD/DVD booting?
Not quite. You can, however, install the system on that disc on another computer and then simply chuck the drive into the machine, most distros (though not sure about the lightweight ones) install a generic kernel (at least by default) so this should be doable without any issues. The other possible method is to create a small partition on the disc that can hold the contents of the installation media and use unetbootin to make the drive bootable - this way, you get to run the installer on the computer you're actually installing it on (just make sure you don't delete this partition when setting up the partitions). However, unetbootin may not work for all bootable Linux media, and sometimes it's kinda picky about what media it wants to make bootable, especially under Windows.
See if you can bump the ram then.
