new_switcher,
similar problems here on my iMac, looks to be the exact same model i have. mine reads and writes cd's, but spits out blank dvd's and seems to skip over damaged areas on dvd's that look clean to me. problems roughly coincide with my upgrade to Snow Leopard. (i have had no other problems with Snow Leopard, really.)
can you provide more info on replacing your optical drive? such as where you got it, how much it cost, should i attempt to replace it myself, etc. (if you don't mind)