You don't need access to Windows to format, you just boot off the DVD. Or are you talking about a BIOS password that is preventing you changing the boot order?
You can remove/reset the administrator password for windows with this tool: http://pogostick.net/~pnh/ntpasswd/ by burning it to dvd then booting off it.
DVD error 5 is strange, are you 100% sure the DVD is correct? Maybe try it on another PC?
It could also be that Windows 7 rejects the netbook if there's some incompatibilities.
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