Mac OS X cannot be installed on this computer

Well, actually it can.  The problem is that if the install disc you are using came from another system (i.e. pre-bundled DVDs) instead of the retail version.  The workaround is fairly straightforward:

1. Create a DMG version of the DVD using Disk Tools.
2. Restore the DMG version to a thumbdrive or external hard drive.
3. Using a terminal window, copy the "System/Installation/Packages/OSInstall.mpkg" file somewhere (i.e. /tmp):
   cp /Volumes/Untitled/System/Installation/Packages/OSInstall.mpkg
4. Figure out what your system type (i.e. "MacBook4,1") is:
   sysctl hw.model
5. Extract the contents of the file using "xar":
   cd /tmp
   xar -x -v -f OSInstall.mpkg
6. Edit the file named "Distribution"
7. Look for the line "var hwbeSupportedMachines" and add your machine code so it looks something like this:
   var hwbeSupportedMachines = [
                       'iMac10,1',
                       'MacBook4,1',
   ];
8. Save the file.
9. Recreate the OSInstall.mpkg file (again with xar):
   xar -c ./ -v -f NewOSInstall.mpkg
10. Copy this new file over the old OSInstall.mpkg:
    cp /tmp/NewOSInstall.mpkg /Volumes/Untitled/System/Installation/Packages/OSInstall.mpkg

Now you shouldn't get that error message anymore.