Remove the trim from around the edges of the room with your hammer and pry bar. Use the hammer and pry bar to remove the old flooring, starting at the rotted portions so you can get the pry bar under it. Take up the entire floor and discard the wood.
Hammer down any remaining nail heads. Scrape the subfloor with a floor scraper to take up any remaining underlayment or other loose material. Sweep well.
Roll out felt underlayment over the whole subfloor in slightly courses, covering the entire floor. Shoot in staples every few feet.
Use your chalk snap line to lay a starting a line for the floor along the longest edge of the room, half an inch out from the wall.
Lay one floorboard at one end of the starting line, with the grooved edge facing the wall. Secure it with your flooring nailer, shooting nails straight down through the surface of the board along both edges, every 10 to 12 inches.
Set a second board off the end of the first, linking them by the tongue and groove fittings on the ends. Nail down the second board as you did the first. Repeat, laying the entire first course of boards along the line. Cut the last one on a miter saw to fit at the end with a 1/2-inch space left there.
Set the next course of boards alongside the first course, linking them tightly by their long sides. Nail down the boards through their sides -- instead of through the top -- driving the nails at an angle just above the exposed tongue. Arrange the boards so the ends don't line up between the courses.
Repeat and continue, laying each new course alongside the previous one. Continue nailing the boards in through the sides, which will hide the nail heads when you lay the next course. Continue arranging the boards so the ends don't line up, cutting the last board of each course on the miter saw.
Use a table saw to cut the boards of the last course along their length, leaving half an inch of space at the far wall. Floor trim will cover the space.