Suggestion:
Most likely the dvd laser is off track. after a while the "sled" that the laser moves on to read the disc wears (usually from overheating and such) the stops down and so the "sled" will move farther than it is supposed to. So when you turn it on the "sled' is at a spot were it shouldn't be but thinks its at the spot it should be. so when it starts reading the disc it can't. its actually reading outide the disc ( cause xbox discs are read from the outside in. not like a cd or dvd where they read from the inside out ). thats why you are getting "insert disc" so called error.
There are other problems as well but this is the one i came across most often. the motor in the dvd drive itself can have gone bad? is the disc spinning? if so its not the disc and is what i said earlier. if you want to you can take apart the xbox yourself and replace the whole dvd drive. just get the model number off it when you take it out and order it over the internet or even ebay. faster and certainly cheaper.
Now since your xbox is flashed and the seals are broke..Microsoft will not fix it. So a new xbox or a used one is next on your agenda.
