X213 - can you clarify a few things:
1) is this the ONLY optical drive on the system? What is it?
2) you say you can read some CDs / DVDs but not all - is there any pattern? What type or class is read and which not?
3) you have a USB device problem - is the CD drive USB or IDE?
4) have you other USB disks / flash drives, and do those work?
Have you a spare hard disk to insert (replacing current) and install either XP again or a fresh install of Win7?
SD