Ok, so I'll start with the CD I made, it appears it was meant for a Power Mac G4, so that probably didn't help, although it installed without any problems.
Ok..so before I try to update, is the 1.2 update file under 'Utilities' the right one?
Yep, still says that the FW is up-to-date..so that shouldn't be a problem. Will switching to OS to a retail verison fix the not booting from CD issue?