Installing servers with vendor installation CD is to make your life easier as it comes with all the necessary drivers for their hardware.
HP SmartStart Deployment Wizard will create a hidden partition and a system partition. Thereafter it will copy the drivers on to the server disk, followed by the OS CD.
For some reason, the SmartStart 8.1 wizard refuses to recognize the DVD, flat file or ISO image for Windows 2008.
If you are caught in the same bind, fret not. Pop in the Windows 2008 DVD and reboot the server. Boot from the DVD and commence installation. The Windows installer will install based on the questions answered during the SmartStart phase.
Lastly, did you match 64-bit installer with 64 bit OS DVD?