Right, Sorry to interject but :
I have the exact same problem
Will read anything as an xbox game disc, but xbmp/xbmc won't read data dvdr's with avi's on.
Always thought that was wierd.
But I just thought what if you created an xbox ISO image using the usual tools and then burnt like a game disc?
Would that work work?
But I'm talking quite a while ago.
When I get back home I'll try mine with the latest media player and see if it will read discs!