This may be possible if you have two optical drives, although I have no idea how, though. In answer to your question, your proposed method is impossible, since the live OS loaded into ram will be trying to access non-existent data (likely in
/dev/sr0) when installing.
But you can use the minimal image, as jmreicha suggested, to burn to a 700MiB CD and install the
ubuntu-desktop package after installation:
$ sudo -i # or 'su -'
# apt-get install ubuntu-desktop
The installer from the minimal CD is simple enough to not explain, but I've had trouble with wireless donogles when installing (the installer needs to retrieve packages from the ubuntu servers), so I would use an ethernet cable if available during the installation process.