As far as your CD/DVD issue goes, have you just tried dragging copies of the off the CD and put into iTunes to play there? Do these files play fine in iTunes?
What about commercial CDs or DVDs. Do these play fine from the drive?
If they don't, then there is something wrong with optical drive. It might be bad.
If commercial CDs and DVDs play fine, then there is something wrong with the way the disc was burned on your PC.
The simple and least expensive fix is to buy a retail, commercially available CD/DVD lens cleaning kit.
You may need to run the lens cleaning cycle more than once.
As far as Internet video goes, try a different web browser if you are only using Safari. Try Mozilla Firefox or Camino.
If the issue goes away using these other browsers, then it's an issue with Safari.
You can try and clear out all of Safari's cache files and make sure you clear out Safari's browsing history.
Clearing Safari's cache files maybe found in Safari's Preferences menu or it maybe located as a separate menu item.
You may even have to totally reset Safari, but do not do this until we figure it as a last resort as this action returns Safari to a default state.
If other browsers exhibit this freezing/buffering issue, then it could be the Flash Player plugin. You need to use Adobe's Flash Player uninstalled app the uninstall Flash, then check the Adobe web site for updates to Flash or the latest Flash plugin, download and reinstall.
Also, this doesn't hurt, find and open OS X's Disk Utility and run permissions repair on your main boot drive.
May not help, but sometimes can clear up some issues.
Another thing I thought of since you have the iMac connected to Ethernet. Do you use a Firewall on your router?
I am not an expert in dealing with end with the router end of the Internet connection. You could see if temporarily shutting off the Firewall improves the streaming video issue on your iMac.
If this fixes the issue, then you need to leave the Firewall off for the iMac, but find a way to enable it for all your other devices and PCs.
Can't help you there as I am no expert.
If none of my suggestions help you, the only other thing I can think of is that it could be an issue with the GPU and/or Logic board or even a failing HD.
If that's the case you need to backup everything to an external FireWire HD and bring your iMac in for servicing.
Do you still have AppleCare warranty service?
If all of the issue still do not resolve themselves, then you need to bring in your iMac to Apple or an Apple Autgorized repair center for diagnosis and repair.
Sorry I can't do anything more for you.
