The first error about the kernel file,
"can't add source, errors:
can't read rpm files from /mnt/cdrom: bad rpm
/mnt/cdrom/kernel-source-2.6-2.6.12-
22mdk.i586.rpm"
is a faulty copy of the file and/or a bad sum check.
It usually means the same thing, a corrupted file.
If you're not planning on installing nvidia or ati graphics drivers or recompiling your kernel, you may not need this file now anyway. The kernel is upto
24 anyway so you may not need that one.
see here....
ftp://ftp.planetmirror.com/pub/mandr.../main_updates/
That error is usually enough to bork the whole process. If you remove that file, and any others that may crop up after, it should setup a new local repository ok.
see how you go. and keep in mind the other advice seen here.