Hi there i am having the same type of problems.
i have done a lot of experimentation this weekend and have drawn very few conclusions. this is what i found.
nvidia drivers 4.12 dont work full stop.
nvidia drivers 3.13 seem to work ok but not as well as MS ones.
nero 6.3.16 seems to hate the drive and doesnt like burning images (iso)
nero 6.3.03 seems to work ok but gives poor quality ISO burns.
i have checked the DVD's with nero dvd / cd speed most times it doesnt even complete the test it comes up with a no seek complete error. when i have got it to complete it reads from about 3x to 7.5x but is a fairly good smooth curve.
i am on beta7 of herries F.w. using infiniti yellows dvd-r (will burn at 6x )and infiniti pro reference dvd+rws (they wrote great first timewhich i was struggling to erase and do anything with)
When the disk is corrupted it was showing up as just a cd drive so i think that is windows xp's default state.
i have just reformatted my hard disk to see if something screwy was happening so i will let you know later on
we anct be the only people having this problem? by the way i know its not the drive as i have swapped it with my one at work too.