Hello:
Legally, the upgrade disc only upgrades the current OS X version to Snow Leopard.
You would need to either purchase the full version of Snow Leopard, or reinstall Tiger (10.4), which came originally with your Macbook and then install the Snow Leopard upgrade.
NOTE: The only Apple authorized way to upgrade from Tiger (10.4) directly to Snow Leopard (10.6) is to purchase the
$169 Mac Boxed Set, unless you upgraded to Leopard (10.5) prior.
Have you considered purchasing an external FireWire 400 HDD instead?
Hope that helps.