I got that exact error when installing FC3 a couple days ago. Turned out I just clicked "OK" after putting in the next installation CD too quickly - the system hadn't had time to spin up and read the CD yet, and Fedora's installer program didn't like it.

Try again and wait a good 20-30 seconds after putting the next CD in before clicking ok and see if that helps. That is all it took to fix that error for me.