OK... Sounds like your MKIV drive is definitely the culprit.

This is what I'd do...

- Buy a legit v. 32 upgrade disc from BMW for $15. MKIV's are terrible at reading burnt DVD / CDs. If that disc is recognized / upgrade works, you can...
- put a legit DVD in and see if you start tracking again...

My guess is the unit is either toast or in a weird state. Order the upgrade disc asap and see what happens...

Tischer BMW www.getbmwparts.com has it for cheap.

Part # 01590141891
RealOEM.com BMW E83N X3 3.0i BMW CD/DVD miscellaneous