Hi, I'm having the exact same problem. It started after I installed Toast 7.0. I used the Toast, but the problem started the next time I restarted my machine.
I am on an Mac Pro using 10.6.4.
I thought maybe the drive had gone bad, so I installed another drive that I had taken out of a G5 Mac and I still have the same problem.
I have tried resetting the PRam (3 times in a row), using DiskUtility to fix permissions and neither has helped.
The drives can read the Mac OSX install disc and but can't read any movie DVDs. It just says "The disc you inserted is not readable by this computer." and then asks if I want to Ignore or Eject.
Can anyone figure this one out?