7.10 has reached its "end of life" and is no longer supported, that's why you can't upgrade.
If the computer won't recognize either the 8.04 or Vista CD (if I understand you correctly) that is a hint there might be a hardware problem with the drive.
The following method is totally unofficial but has worked for me in the past.
Use the find/replace feature to change every instance of "gutsy" to "hardy". Save the file and quit out of gedit.
gksu gedit /etc/apt/sources.list
I hope that helps.
sudo apt-get update && sudo do-release-upgrade