The CentOS 4.8 i386 install media has an option for the older i586 processors, as well as the normal i686 installer. The only problem is that the i586 kernels are broken on the released install media for CentOS 4.8.
If you need i586 install media, you can download them from here.
Since the upstream product on which CentOS is based does not support i586, we decided to fix the issues and release an i586 installer separately so as not to impact the already released products. One of the main reasons we do not want to change the OS directory to be different than the released ISOs is that we know some people use jigdo (and probably other things) to create installable media from the mirror trees instead of downloading both the trees and the DVD, etc.
Because of the need to keep the OS directory for 4.8 the same as the original install media, if you want to use the new i586 media to do a network install, you will need to create your own tree and publish it (you can mount and publish the i586 install DVD for this), or you can install from: