No - as long as you have a 'good' update CD, then it WILL boot into the OS loader.

It seems what happens when you install the CD initially is that the NVRAM or EEPROM that the OS resides in gets flushed out. The Navicomp then reboots into bootloader mode where the only thing it will do is load a new OS. So if at this point the CD is bad, then you are left with a Navicomp with no OS (and probably a stuck upgrade CD).

Burn a good quality CD slowly with something like Roxio or Alcohol and try again. You should find that the system will initially read the CD and then go into update mode & all will be fine.