These are three distinct and separate problems.
- Video Driver
Make sure that you download the full driver first. Don't perform a WEB INSTALL that pulls files from the internet during installation.
At worst, uninstall your existing drivers, reboot, run the ATITOOL to remove any vestigages of the old driver, reboot again.
Windows should come up in VGA mode. It may look ugly but it will still run albeit slowly.
Then re-install the ATI drivers.
- DirectX
It doesn't matter what version of DirectX you have, you still need to download and install the DirectX9c redistributable AFTER you've updated your video drivers.
This is an important step and it must always be done after any driver updates.
- DVD
Check the Realflight DVD's to be sure that they are scratch free.
Also copy all of the files from each disk one disk at a time, to a subfolder on your computer.
This makes SURE your computer is able to read the data off the disks correctly.
If it succeeds, re-run the installer, but instead of letting it come up by itself, right click on the setup.exe file and select "run as administrator".