Well, my response was accidentally deleted when my Internet glitched; so here's my recreation of the posting. It sounds like you either have a damaged disc (warped, dirty, scratched, etc.) or your drive might be on the way out - although the latter seems unlikely if other things work fine. Anyways, while you look at the CDs you might want to try this:
Step 1 -- Create a folder on your hard disk, for instance, C:\KCDs.
Step 2 -- Copy the entire contents of KotOR 2 CD #1 to that folder
Step 3 -- For each of the other CDs, copy only the single filed named dataX.cab to the same folder, where the "X" in dataX.cab is the number 3, 4, and 5 depending on which CD it's on.
Step 4 -- Run the installation program Setup.exe from that folder you just created.
When you're done installing it, you can delete that folder from your hard disk.