Sounds like your drive is screwed. I had exactly the same problem on my Windows laptop. Some discs would work fine, some wouldn't work at all and some would work fine for a while before refusing to work.
The "solution" to my particular problem involved pressing down on a certain part of the drive's outer bezel whilst it read the disc. I think the laser wasn't lined up properly or something like that.
My advice would be to get a new drive.
Btw, if you have 10.2.8, I'm not certain if you are eligible for the 4.6.1 DVD player upgrade. That wouldn't solve the DVD-ROM problem anyway.
A good reset of the PRAM and NVRAM may help in this situation, and maybe even reset the CUDA switch on the motherboard -- those seem to help in times of seemingly dead FireWire ports and may help here.
no joy resetting the PRAM and NVRAM. Searched some other places and seems to be a consistent problem with the Superdrives. Tons of people reporting the same problem. Apparently Apple has no interest in resolving the problem.
Apple has "fessed up" to pretty much all of their blunders (iPod batteries, iBook batteries, iBook logic boards, G3-OS X settlement), but it does take time. If this problem is truly common and widespread, then Apple will no doubt address and rectify the issue.
It takes time to gather defective units, test the defect, prepare a fix, and deploy a repair plan, and sometimes it takes a really long time if the problem is elusive.