why can't I upgrade my late 2013 iMac to Monterey ?

Because 10.15 Catalina is the highest macOS that supports the Late 2013 iMac's hardware.

does that mean, now that I've upgraded to Monterey after installing a bigger hard drive and transferring all the info from the old drive to the new one, that all my years of work stored on CD's and DVD's will not be able to be read?

Old hardware. Sorry!

Because Apple sees it as vintage and too old to have the great user experience with Monterey

No, it does not. Of course you can read your files - unless the app you created them with is either discontinued or requires an upgrade to open the files on the new/current OS.

It doesn't even see the optical drive when a CD is played. Is there additional firmware for an external CD drive?

You do not need any firmware; the drive itself does not show up on the desktop - only the CD or DVD usually does. Does it play the media you insert?

I have to unplug one of my external hard drives to use the USB port, and when the disc is inserted, it doesn't show anything..gives me some message that it can't be read...it should still show up