New HD - Mid 2007 MacBook - Wrong OS Disk
Your MacBook should be able to run 10.5.x - to be precise it should run anything up to OSX Lion (10.7.5).

The way to install it is by using a retail version of the OS you want to install. If the DVD is e.g. for an iMac you won't be able to install from that on your MacBook, even though its the same OS.

Try downloading an image of the version you want from Apple and then follow these instructions: http://www.macworld.com/article/1161069/make_a_bootable_lion_installer.html

Hope that helps!