I am having the same problem and replies I have seen on these forums and others are miles away from the solution. Cleaning the drive doesn't fix it, reinstalling the drivers doesn't work as the DVD-RW drive doesn't require drivers as such but is installed generically via XP, hence you can't roll back drivers either for the DVD-ROM.
It is almost certainly a registry issue, one of Microsoft's flaws in all guises of Windows. I remember last year having the same problem and funding something online to fix it (a downloadable registry fix) but I can't seem to find one that works this time.
The fix-all answer of "clean the lens" is neither use nor ornament except in the very obvious of problems where there is a problem recognising all disks, not just DVD's.
So in short, if anyone has a registry fix for this problem where XP recognises your DVD-ROM but only recognises DVD disks as CD's, then please post it.
Stumped, March 2007