I'm having the same problem with a Dell with XP. The original cdrw wouldn't read any cds. It would spin and act like it was reading it. If I opened the drive through "My Computer", it would show a blank window. If I opened the drive through the run command, it would say there was no cd in the drive.
I replaced the drive with a Lite-On dvdrw and I'm having the same issue. Both drive work when in other computers.
On the affected computer, I can still burn cds and dvds on both drives. The media that I burn can be read, but no other media can. I can also boot to cds when I reboot.
This is obviously a software problem, but I'm still lost. According to updates copies of McAfee and MS Anti-Spyware, the computer is clean.