The problem for me turned out to be my DVD-ROM drive. I had to convince the techs where I had the computer put together that I even had this problem. It isn't discussed much on the net, and the techs weren't even familar with it.
Try a few tests. Can you easily copy this CD over to your hardrive using your second optical drive? Your burning drive, that is.
If you have DVD burning capabilities, burn the same data to a DVD that you did to the CD. Then see if you can copy the data from the DVD to your hardrive using the optical drive in question. Myself, I could using the DVD burned data, but not the CD burned data...which can lead to a huge arguement with techs who sold you the product...them saying it is most likely the media (CD) that is the problem.
Can you change your bios settings to boot from CD-ROM before the Hardrive, and will your system still boot without a bootable CD in the drive, even though you chose to bypass the press anykey to boot from CD option as your system boots? Mine couldn't. Yet if I left a CD in the drive it would boot. This could be a symptom peculiar to my optical drive problem.
Now the reasons for these problem occuring are a little sketchy because when this problem first started occuring for me, it just so happened that I had just prior to it had performed a couple of upgrades to my brand new comptuter...I flashed my bios ("Aha!" you say. "That's got to be it!" ...Uhmm...not necessarily.) I also had just upgraded to XP-SP2. ("Impossible!" you say. "How could an SP2 upgrade be responsible for this?" I don't know if it could be.) These are just the couple of things I performed on my system prior to this problem occuring. Could it then be purely coincidental? I don't know.
Can you check your manufacturer for a firmware update? Mine was outdated and no firmware update support was available to me.
One of a few of things could be happening.
1. Your optical drive could be going out slowly.
2. If you updated to SP2 your optical drive is not compatible with this major Windows Update.
3. If you updated your bios recently, maybe that did something.