I found my old computer in my basement and decided to install linux on it. The problem is that there's a problem with the CD Drivers so that CD  drive is not functioning. Even worse, it seems that someone has formatted the computer and there was no operating system on it. Does anyone know of a good distribution of linux that would fit on 1 or 2 floppy disks?

thanks for your help

Theres a good list of linux distros here

http://en.wikipedia.org/wiki/List_of_Linux_distributions

In the section on small distros a couple are mentioned as coming on floppies.

If it is an old machine I suggest you get Xubuntu.

2 floppies you say?
http://floppix.ccai.com/
check that out.
also for a nice solid Debain floppy install
http://linux.simple.be/debian/floppy