There are no disadvantages to a clean installation. But the return on Lion has been severely culled due to Apple's decision to prevent any kind of modification to the OS. With previous OS X builds, users were able to select (and deselect) packages (such as printer drivers, extended languages, etc.) during the installation process. Lion brings everything and the kitchen sink.
The ability to trim away parts of OS X was probably the most compelling reason to perform a clean install (saving GB of space).
Your notion of how hard drives work isn't accurate. There's no "prime" location for data, outer ring or inner ring. So long as the files are contiguous, your data will be delivered optimally. Access times depend on rotation latency (speed at which the disks spin, calculated in RPM) and seek times (the time it takes the head to reach the desired location to reach the file), although density plays a role too, by packing more bits of data per region (thus increasing throughput).
Moreover, OS X handles the defragementation of small files on a regular basis, ensuring continued performance over time. It's also of note that such things are gone by way of using SSDs.
Lastly, clean installations may also reduce bugs introduced by updates. While OS X is quite resilient, updates can introduce new bugs into the system. Often times, Apple technicians will request a clean installation and applying only the latest subsequent update in an attempt to isolate bugs (rather than upgrade from a previous version of the OS and then applying a slew of incremental updates). These problems are however quite rare.
There is definitely something wrong, what you've described sounds like exactly the right steps to solve your problem, either you're doing something wrong or the disk is damaged or your Mac's optical drive isn't working.
Hold down the option key while booting your Mac, and insert the Snow Leopard install disk. It should show up after a minute (maybe you have to press "refresh"? I can't remember), and you can boot from it. Before installing, it's probably a good idea to use Disk Utility to repartition and erase your hard drive, specifically to remove the recovery partition that Lion has created for you (it will be recreated if you install Lion again later).
Failing that, you can try booting from the Snow Leopard install disk using another Mac to see if it's working, or try using someone else's install disk on your Mac. You might also try duplicating the disk on your Windows pc (using an app that does a low level/raw disk copy, not just a file copy — which will not work).
If none of that works for you, perhaps take your Snow Leopard install disk in to an Apple store or Reseller and tell them you can't get it to boot, maybe they will be willing to test the disk for you and perhaps give you a new one (for free if they're really nice).
You can also use someone else's Mac to download Lion (open the App Store on their Mac, log out of their account, log into your account, go to Purchases and click download on Lion, then log out of your account. Remember to log out of your account! otherwise they might accidentally buy apps with your credit card). Once you have the Lion install package on their Mac, right-click and Show Package Contents on it and drill through the folders until you find the InstallESD.dmg file. Use Disk Utility to copy that DMG onto a DVD or USB memory stick (use the "backup/restore" feature to copy the DMG's content onto the disk). Old Macs can't boot off a USB memory stick, but all recent ones can.
I've been told most Apple Stores are willing to do the above for you if you explain you've got a slow internet connection at home.
Best Answer
Installing cleanly gives you the advantage that you will know if an error is due to the "as-shipped" condition of the software before you add your data and applications to the mix. The installation of a new OS is the primary time when people notice corruption of a filesystem or other hardware type errors since a machine can often keep running well with some little errors. But relinking all the kernel extensions and drivers and knowing that your accessories and applications will all take to a major new OS is a lot of change. Spending a little extra time up front can help isolate issues if you have them.
By running the migration later, you have more control over things and can also choose to hand migrate anything first that you don't trust the tools to automate.