The proper way to install any system software is to start up your computer from a volume other than the one to which the software is to be installed. This is most commonly done by starting up from the Disk Tools disk and installing onto the volume you want to upgrade. When you want to install from a CD-ROM disc, you start up from the Disk Tools disk and then put in the CD-ROM disc and install on the hard drive. This procedure works only for Apple CD-ROM Drives because Apple's Disk Tools disk may not have the neccesary drivers to mount a third party CD-ROM drive.
Because you have a third party CD-ROM drive, you were forced to insert the CD-ROM disc after you already were running your computer off the System software on your hard drive. You were then installing new system software over your existing active system software which may not execute properly.
The steps to remedy this situation are to re-install the previous system software and then to re-install the CD-ROM drive software which came with the your third party CD-ROM drive. You can now access the System 7.5 CD-ROM disc and use the disk images to make floppy disks of the System 7.5 install disks. You can then use these disks to follow the procedure for installing System 7.5 from floppies.
Page 10 of the System 7.5 Upgrade Guide contains the following:
"IMPORTANT: If you are installing from a CD onto a Macintosh with a non-Apple CD-ROM drive, make a backup copy of the System 7.5 software before your begin installation. If you encounter problems during installation, you can install System 7.5 from the backup disks. (You won't be able to use your CD-ROM drive again until the System 7.5 software is installed on your computer. The startup disk that comes with your CD recognizes only Apple CD-ROM drives.) For instructions and disk images, see the Back-up CD folder on your CD."