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Have you selected CD in the burning software as opposed to DVD?
Have you tried uninstalling/removing the drive through Device Manager and rebooting?
DVD/CD drives have 2 lasers - or a dual laser, one for CD's the other for DVD's so if you cannot play/record to CD there is a strong possibility that the drive has failed in the CD department.
Do you have any old CD-RW disks that you have burnt in the past? If it can read those, try burning a few files onto them. I am just wondering if it might be that drive cannot read the new(modern) media disks.
I would think it is a problem with that particular CD-RW, unless you have experienced similar problems with others. Personally I never use them or DVD-RW's - when I think what goes on when the disk is erased and written to again I don't feel comfortable
The disk might be formatted in the UDF format. UDF is where you can write and delete files on the disk, whereas without it, you can burn files onto the disk, but to remove them, you need to format the disk. If you don't have a UDF reader, the disk won't be recognised. The Ahead UDF reader/writer is InCD, Adaptec is DirectCD. Windows Vista can read UDF disks (and probably format them), in case you have access to Vista.
I would avoid installing a UDF formatting program, unless you really needed it. When they don't work correctly they can cause big problems.
You will need to try it on other computers if yours can't see it.
It seems strange that the drive burnt the original disks and now it can't read them. Do you know if there has been any "automatic driver updates" carried out on it? The updates for optical drives are firmware updates, not drivers. They are like motherboard BIOS updates, if the updater get's the model wrong, the drive doesn't work correctly afterwards.
You will need to isolate the problem to the drive, the disk or the OS.
I've been watching this thread from the sidelines but can no longer hold my tongue. You can go out and buy yourself one of those little Cleaning CDs with the "hairs" on the disc and try that, but I think the handwriting is on the wall.
Understand that those little optical lasers inside the drive can get dirty, become misaligned or just plain wear out over an extended period of time. Your drive is actually a Phillips and its a historically problematic Phillips drive at that. Its going on 4-5 years of age and is a single layer drive that never did handle (-) discs as well as (+) discs. I'm told that BenQ sold a lot of these drives as debadged HP and Phillips drives and there really isn't much in the way of a firmware flash that has proven to be reliably successful.
Please don't slay the messenger but you would probably be well advised to purchase a new dual layer DVD/RW drive from NewEgg or another reputable online retailer. Yes, you can buy one locally at roughly 2-3X the cost of what you can do online. My recommendation from a price/value perspective remains with Lite-On and you want the full retail package so you are assured of getting the right software bundle for the drive itself. These can now be had for about $25 and if you are lucky, you may even get free shipping this time of year.
Replacing the drive itself is about a 5-15 minute task, depending upon your case and the skill level required is (knowing the difference between the grip and the blade of a s_crewdriver). Most retail boxes include both a black and a white bezel should aesthetics be a concern. Changing bezels can be a bit more daunting but I'll be glad to walk you through this if Santa brings you a new drive.
