I am having the exact same problem outlined in the original post. Yesterday I had an appointment to see a genius. They told me they do not support BootCamp, but they did try helping a bit. They took my XP CD (new cd I purchased, not an upgrade) and put it into several mac they have in the store. Everyone of those macs had no problem "seeing" the XP disc.
They then put a movie in mine and it played fine. They then gave me a brand new MacBook since (clearly?) there was something wrong with mine. My harddrive was swapped and put in the new one.
We then tested it..put the XP cd in and my MacBook SAW the XP cd. GREAT!!
I leave and go home. Get ready to install XP using bootcamp...
what do ya know..doen't work. Same exact problem again!! My, now new, Macbook can't "see" the XP cd again.
How can this make any sense???
I then download Parallel to load XP that way... Same issue. It can't "see" my XP disc. Just spits it out.
The whole entire reason I bought this MacBook was so that I could run XP for some things I must use for work. I was actually very happy with my PowerBook and now this MacBook is making me regret switching. The only reason I bought it was to run Windows! And apparently since I ordered a larger HD I can't return it either.
Would love to know if you have found a solution.