The documentation is lacking a LOT! and its not easy to figure out everything youreself! but to me that seems to be a CD-rom problem! just as with the RAM not every cd rom seems to be usable on the Peg a sad fact! try another one! might also be the ide cable! are you sure you have the right one? you might wanna read trough this a bit
http://www.morphos-news.de/help.php?lg=en&id=inst