Definite difficulties upgrading to 10.6 from external optical drive
I have a similar problem with a flaky internal optical drive but a functioning external drive. Installing from the external drive didn't work -- it would get through the first 10% or so OK, and then announce that it had to restart the machine to continue the installation. After restart, it would just boot normally back into 10.5 and never resume the installation.
Holding down option during the restart did bring up the boot drive picker, but the Snow Leopard install disc in the external drive was never given as an option no matter how much fiddling I tried, and I would eventually have to resort to booting back from the main hard drive, which would again leave me at 10.5 and having to restart the install from scratch.
I finally resorted to trying my flaky internal drive, which was finally coaxed to read the Snow Leopard disc with some patience. (Hopefully I don't have a corrupt OS install.) Obviously this solution won't work for most people who find themselves trying to install from an external optical drive.
If you've got a second mac with a functioning optical drive you might try CD/DVD sharing. If you don't have a MacBook Air you'll need to try this hint, though:
http://reviews.cnet.com/8301-13727_7-10427176-263.html