My thoughts?
You need good, working memory
Leopard works better with more than 1GB - 2GB is even better.
Adding more (good) memory should normally make the Mac more stable, not less.
You keep saying that the sleep light is not working - but you now say that you see the "ambient light sensor" flash briefly at startup. The only possible light that you would see flash on the front is the sleep light, which should light up briefly at startup. If the sleep light was broken, then you should never see that work. - That light is not working as a sleep light during boot, of course, but it also tells you that it is not broken, but simply does not indicate sleep - and you say that sleep does actually work, but no light - Do I have that correct?
Do YOU have any thoughts on that?
Finally, your DVD problems are not likely related to the power problems that you might have. DVD (optical) drive problems are a typical MacBook failure. If cleaning the drive does not help (it usually doesn't, but stillworth a try), then you either replace that drive, or use an external burner.