I've been having issues with mine not properly installing even though it reaches 100% without issue. I would think that your issue is you're not actually running it from the HDD. If on the main screen you hit Y for Game Details and see a CD icon then you're loading from the DVD. You need to make sure you see an icon that looks like an HDD and then hit Play Game. Also try clearing your cache if your HDD takes too long to appear there.
You only need disc's 1 and 2 installed. I think it's mentioned here that installing disc 3 can cause issues.