I don't know why it won't use the packages from the DVD, go ahead and pick ftp or http. That way you do a net install and you get your sources setup for yum
Yum is a package manager program similar to apt-get. It has a list of online repositories (ftp/http sites) that it downloads packages from. You use it to easily install software and keep your OS up to date. You tell it to install a program, it downloads the package + calculates it's dependancies and downloads those packages too, then it installs them and gives them a initial configuration.
It should give you a list of mirrors to pick from, but you can get the most current list from
http://fedora.redhat.com/download/mirrors.html
Although I suggest that once you get up and running you go and install the apt-get package from dag's rpms.
http://dag.wieers.com/home-made/apt/
Read the install instructions and the "truth and lies" about mixing repositories. Install the synaptic front-end for a nice GUI interface with apt-get
That will give you access to all the official Fedora rpm's and updates as well as the legally gray packages like those needed to play most DVD's and mp3's and a veriaty of third party packages and programs.