ah, ive installed windows operating systems so many times... i have seen that problem quite a few times when customers gave me disks that were damaged, it would install to a certain percentage every time and then get hung up. I even had a case of a brand new WinXP Pro. disk, pulled out of the package, never set down or touched on the back, just right into the drive... and it froze every time at the same spot.
It could be the disk.
Try taking it back to the store, tell them you need a new disk, you already have a key. There should be no problems in them giving you a new one. Or before you try that, im sure there is an .iso of win7 floating around somewhere on the net, download that, burn it, type in your key and see if that works.
Hope that helps