Try playing with the C-stick a little, maybe reseat the cable or replace it (or remove it entirely then power on the system to see if the problem persists). It might not be the problem at all, but it could be that it's not the circle pad since...
Might sound obvious, but did you change the motor controller back to the original after testing with the new laser sled? It could be that the original controller wasn't at fault if it only started reading dvd's after the sled was replaced.
That...