Have you tried putting in another floppy to see if it is your floppy drive? This may sound like a weird question, but is the floppy black colored?
I have heard where some floppy drives use an optical detectors to detect the floppy and sometimes the black housing of the floppy does not reflect enough light so that the drive can detect it. Just a theory that I read in a magazine. If this was the problem, they recommened to put light colored electrical tape around the edges of the floppy.
I'm not a number, I'm a free man!