For RH72 (including Red Hat Advanced Server 2.1) and previous, they are not able to install directly from ISO image files. For these you must unpack them into a directory and then point the installer to that directory. (This is concerning network and hard drive based installs.)
Starting with RH73 you can install from ISO images; i.e. you don't have to unpack the CD's 1 2 3 into some directory so you can install from them. Merely point the installer to the ISO image directory and all will be taken care of. (The ISO images should contain disc1, disc2, ... in their names so the installer can find them -- originally they are named this way). (This is concerning network and hard drive based installs.)