A quick question- the old one sitting on the sidelines for a "year". If it has not been updated since August 11th 2009 (test
https://docs.google.com/View?id=dnfmv5h_30dw33vpf4 ) then you can JTAG hack it which is good for you (quick and easy region free, USB loading, hard drive loading, hacked games, XBLA, DLC and much more). If it looks awkward to do I do encourage you to find someone that can do it- JTAG machines are valuable things indeed (although launch devices are less desirable for it due to RRoD risks).
If the old one was not doing well on the reading front chances are the laser is either dirty or dying. If it is dirty clean it and if it is dying then you might consider a POT tweak (short version there is a variable resistor/potentiometer going to the laser- change this to allow more power to the laser and it often starts reading again) but most consider this a stop gap measure and you will be replacing the DVD drive sooner or later (do not buy a laser assembly as they are a pain to fit especially if you are not versed in it).
There are a few hacks with USB/hard drives and injecting DLC to them (stuff that came with game of the year edition games and such can often be copied right to the hard drive and have it work right away- not sure what the list stands at these days), a few other things (one of the early versions of shadow complex you could bypass the block on in game) and I think there is still the shared profile hacks going on (if you have live and the machine is not banned you can inject profiles that have lots of GOD (games on demand- downloadable full games), XBLA and DLC games with them to play them) although I have never been a great fan of this method.
Either way though you will probably look to DVD flashing in the end. The general idea is you get the DVD keys unique to your 360 from the DVD drive (can be trivial or a right pain depending on model and firmware version), build a hacked firmware with those keys (a few clicks with a fairly simple program) and flash that hacked firmware to the DVD drive before putting it all back together. DVD firmware updates happen a couple of times a year these days and MS have recent got into making life ever so slightly more annoying for flashed DVD firmware users.
You can download isos or rip them if you mod a drive to do it, the program ABGX360 is used to check isos to make sure you have good ones (
http://abgx360.net/ ).
You can get a nice tutorial from
http://www.jungleflasher.net/downloads.html but if you have any specific questions do feel free to ask. Edit: forgot to mention there are also somewhat self contained flashing kits these days if you do not fancy kitting out your PC with gear and your wallet is feeling too fat not to mention there are drive emulators supposedly appearing in the not too distant future where you hook up a USB drive to the device and it tricks the 360 into thinking there is a disc in there (might be worth considering if you are already deciding upon whether forking out for a replacement drive is a good idea or not).
Oh and just to round it out you can buy a replacement drive of the same model as yours and swap the PCB if you want. If you are already flashing things you it is up to you what you want to do (personally a simple bit of software poking beats having to fiddle with circuit boards for me).