I'm having a similar problem
I have DVD/CD-RW combination drive.
I have tried installing and uninstalling the drive and drivers, and the computer is saying that all items are working (at least in the system manager). I am running Windows XP Home.
I have uninstalled Real Audio and Windows Media Player and reinstalled only Windows Media Player 11.0
I can get it to read and play DVDs but it won't read any CD-ROMs or Music CDs.
Which leaves me with no way to get the system recovery going.
How can I tell if this is a software or a hardware problem?
Any suggestions?