This Windows bug was suppose to be fixed with Windows XP Service Pack 2 (SP2). From your post, I see that you have more than one burner. I had the same problem after I attached a second burner to my system. The second burner would not prompt me to choose an action when I inserted a blank disk into the burner. I did the same thing you did. I went to the DVD-RW properties, selected the Autoplay tab, pulled down the Blank CD window and made sure that "Prompt me each time to choose an action" was selected. Nothing worked in the Blank CD menu.
The bug continued to plague my system until one day I flashed new firmware for the first drive. The problem with autoplay on the second drive was gone but now the first drive inherited the problem with autoplay. I disconnected the first drive from the system and only booted with the second drive. Autoplay worked again for that drive. I re-attached the first drive and started Windows. Autoplay works for the first drive again but doesn't work for the second drive. Dajavu!