The reason your seeing a directory is because you haven’t burned the ISO.
If you’ve got a spare PC, download imgburn (if you have windows). Once you’ve done that, you’ll need to download the ISO again, although you can just transfer it from the CD to a folder on your desktop and then select it from there. Either way, you’ll need to burn the ISO onto a CD and then you’ll be able to use it.
+1 for PeppermintOS (Two) … it will fit on a CD and is based on Ubuntu 11.04
or you could try the Ubuntu “Alternate” install CD image … available here: http://releases.ubuntu.com/11.10/
It’s smaller than the “Desktop” image, but I’ve no idea if it will fit on a CD … be aware the alternate install CD has a text based installation procedure not a pretty GUI routine, but it does install the same OS.