[Sorry, I am not able to edit my post. I finally found information on this that there is a time limit to do so. I also cannot delete my attachments. The mods can remove the images that I posted in my first reply, or show me where I can do this. Anyway, here's a how-to with the same photos with additional information, but this time they are coming from my photo sharing site.
I'm repeating myself here, but opening up the unit and putting a sticker - pad on the puck from the inside only messed up my drive further and it would not play a disc but make an additional noise. So I had to take unit out, open it up and remove the pad. Back to square one, but I had a clue as to the magnet being part of the problem on this brand of optical drives.
Here is what I did, with made up descriptive names of the parts in question as I don't know what they are correctly called:
Remove optical drive from machine. No need to open unit up. Remove cover plate, that can be made of plastic, or on older units, of metal. With top side up, using sharp pocket knife, carefully pry around the cover plate (and label) to loosen the glue that holds it down, working knife in angled circular direction of plate. No need to go all way round, just enough to easily remove the contents: the white plastic puck.
Turn small metal twist cover in clockwise motion to unscrew it from plastic puck, being careful not to break off any of the three plastic tabs, as I had done the first time I unscrewed one (actually, I used a screwdriver to push one of the plastic tabs upright, thinking that was how it was held down, which broke it off). If you pay attention, you can easily see from the small twist cover that you unscrew it. Once lid is removed, you will see the 10mm metal magnet that is held magnetically to the twist cover. It has a hole in the centre. You can check magnetic strength with your screwdiver or pocket knife and find out just how strong LiteOn's magnet is. This magnet is what pulls the spindle up to secure the disc in place against the plastic puck, and if the magnet is too strong, it can stretch and prematurely wear the rubber belt as it refused to release the spindle. It can also cause the spindle to not fully pull away from puck when button is pressed to open tray or close tray, resulting in the spindle dragging along the inserted disc and scratching it. At least, this is what I believe happens. I'm not an engineer.
Next, double over a piece of Duct tape to make it two layers thick (sticky sides against each other) and measure and cut a 10mm or so circle. Remove the magnet from the small metal twist plate and use magnet as a pattern. Remember to replace and center the magnet back on the twist cover. You can adjust padding/sticker with scissors to make sure it will fit in the inner circle section of puck. Then with nail, poke a hole through the middle, making it large enough to fit over the centre post of puck. (I tried making a three layer circle padding, but it was too thick and wouldn't allow the magnet and twist cover to close down, so two layers is sufficient.) Use magnet and twist cover to depress the tape flat, then with counter clockwise motion, push thumb and secure the twist cover making sure the three tabs lock in their grooves. No need for glue in this project.
Place puck back on top of unit, and close the cover plate, pushing it down to secure it. If you need glue, then do so, but I didn't as the old glue was still sufficient to hold the plate in place.
Replace unit back in machine and test it.
Mine has been working as it should for two days now, whether I am in Linux or Windows XP. The button works as well as using "eject" from computer.
I was thinking another option would be to replace the magnet with something less magnetic. We have plenty of pliable magnets on our refrigerator, and wonder if making one to fit would work without the need of a any added diffuser padding.