I have a very similar problem. When I boot from DVD, it loads files, then proceeds to start setup, which appears in black and white, then it reboots.
If I run setup from within Windows, it does it's thing, reboots when needed, then same problem. Gets into setup, which loads in black and white, and reboots.
If I run it in Virtual PC with the same CD (not image) in the same drive, setup loads in full color and everything seems to be working from there. But I don't want to run it in Virtual PC...
Update: Nevermind, it's not black and white, but more like very limited colors.