if you planning to install kubuntu-desktop from the cd (which im not sure if its even possible), then ignore all the entries in /etc/apt/sources.list except the cdrom lines.
those are the two most important lines. make sure they are not commented out, and read correctly. once you have done that, first run:
sudo apt-get update
the cdrom line in sources.list should read something like:
sudo apt-get install kubuntu-desktop
but would be slightly different for kubuntu. you need someone with a full kubuntu install of 7.10 to help give you the correct line. if no one has replied by tonight, then when i get home i will get the correct line and post it up here.
deb cdrom:[Ubuntu 7.10 _Gutsy Gibbon_ - Release i386 (20071016)]/ gutsy main restricted