I don't want to sound stupid, but can you just borrow or purchase a different DVD drive for your 360 in the meantime?  Is it keyed to your XBOX somehow?  At this point, you may want to try that to save your sanity.  It could just be the DVD drive itself or possibly the DVD's that you are trying to use. 

I have never modded a 360 but I've modded 1.0-1.6b XBOX's, so I know what you're going through.
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