Okay, firsts first. This is a retail copy, right?
Assuming that it is, this sounds like a CD problem. If the problem is installing, and apparently not actually playing the game, your first culprit is the physical media.
Now, if it isn't that, you're looking at a problem with the video files. (Disc 2 is the first actual game disk, so that's why disc 1 isn't doing anything. 1 is only an installer.) Have you investigated the video codecs on your machine?
Some one else who knows more about video problems will have to go from there, since I haven't had that problem personally.
If it's a problem with the disks, though, your best bet is getting a new copy of the game. Or, you could try creating ISO's of the game and re-burning them onto non-scratched disks...that might make the install process actually work.