Isn't it conclusive that since it reads DVD games and movies, it's fine?
No, since you have checked out pretty much everything else. If you can't manually boot from media you know is good and will boot from another system and your system works otherwise, it is likely the optical drive itself. Just a thought and the course of action I would take at this time.
BTW, I assume this is a SATA optical drive. Is that correct? If so, what SATA mode are you using (IDE, AHCI, or RAID) for your SATA controller(s)?