Well, it's working now (mostly), but I don't know exactly what cured the problem.
I did a Windows XP repair installation. This is not a full "scrape the disk" installation as it preserves all users data and 3rd part software. The bad news was, this effectively down graded me from SP3 to SP2 (because that was the only XP load disks I had) and broke a couple of drives.
After several hours of downloading and installing patches via Microsoft Update and searching and install the latest video and audio drivers I finally got back to where I started ! Yes, that is correct. The Microsoft standard CD Writer Wizard still gave me "There is no disc in the drive. Please insert a writable CD into drive."
So something in the back of my brain said, "Let's try something different !" I downloaded FinalBurner FREE and SHAZAM it worked !
So I got brave and reinstall Nero 7. Joy, it works also. Plays movies, and burns data DVDs (that is all I have verified).
So maybe the XP repair did fix the problem, but the MS CD burn wizard is broken as far as I am concerned.