What kind of Mac OS X Install DVD is it? Mac OS X 10.2 came on CDs only -- DVDs were shipped with new computer purchases. Could it be that the 10.2 DVD you have is system-specific to a computer other than the iMac, perhaps a G4 or something?
If so, then a lot of times those grey "Software Restore" or "Software Install" DVDs will only install on the computer model they shipped with.