"p.s. i am using a wireless mouse and keyboard could it be anything to do with that? "
Possibly,i always setup a system with a wired mouse and keyboard.
SP2 has several features and i believe it has support for the wireless devices but obviously needs to be installed first prior to using wireless devices.
I have seen posts here at PCA having problems trying to install an os with wireless mice and keyboards.
Certainly worth a try with a wired setup.
If your os is SP1,download SP2 and burn to disc and install once the SP1 os has been installed as opposed from MS updates.