Try using a third party boot CD to wipe the drive next... you could use Hirens Boot CD, DBAN (my fav), or other boot CD that has the option to thoroughly format the drive.
I ran into a similar problem once where install would always hang at the same point while copying files. I tried everything I could think of without luck. I finally tried a different optical drive and the install completed without issue. Do you have a spare optical drive you could try?