When you say about not reading disks, am I asuming right you mean disks that you've burnt or ANY,
Yes XP does have it's own cd-r/w burning abilities. But if you also got something like easy cd loaded has well, these sometimes cause conflicks between them, try either unistallling your own burning software and see if this makes a difference, or try disabling the XP burning software.
Have you tried restoring XP back to a know time/date that you know that it was reading cd o.k.
P.S not 100% sure but I don't think XP can burn dvds, you might need to have separate burning software for this?