Before burning fresh CDs I thought I'd try my originals in OS9 to see if that worked - I found it did apart from one sound bank CD was first not recognised so I popped it in again and it worked.
Maybe the old DVD drive is playing up?
With that in mind, I tried OSX install again - sure enough, I got past the hanging by popping the CDs in and out until it worked. However, when first run of Reason asked for the sound bank, although the disk was recognised (mounted on desktop) it was just hanging again.
Oh well...guess v3 it is then. Thanks for your time and help.