yes, the very first thing you have to do is try the drive in another machine just to make sure its working - or try another cdburner in your machine.
you didnt mention what "peripherals" you have, but USB can be very problematic with several devices that must all power up before the boot order can continue. You could try disabling all USB in the bios.
Nero has some probs with auto insert notification checked in dev man for opticals, so disable ejection after burn in properties in Nero
SP2 also has probs with certain burning software like InCD if before a certain version.
A 250W PSU is really asking for trouble with todays systems.
The fact the drive attempts to spin up by itself while in windows for no reason means something is trying to access it (manually stop all services/processes not essential as a test), or the system loses track of the drive and attempts to redetect it for some reason - like a molex not providing good 12V. In other words its as if you pulled the plug on it for a short while.
At this point, it would seem bad drive, or weak PSU, or too many USB, or intermittant voltage to CDROM, or bad IDE controller chip on mobo.
You may wish to try this:
4) Remove the Upperfilters and Lowerfilters values by:
a) Expand the "HKEY_LOCAL_MACHINE" key (looks like a folder) by double clicking it.
b) Expand the "SYSTEM" Key
c) Expand the "CurrentControlSet" Key
d) Expand the "Control" Key
e) Expand the "Class" Key
f) Please look for a key containing the following string of letter and numbers:
{4D36E965-E325-11CE-BFC1-08002BE10318}.
g) High light this key by left clicking once on it
h) On the right hand side you are looking for "Upperfilters" and "Lowerfilters", once you find these please delete them by high lighting (left clicking on them once) and then right clicking on them and choosing "delete"
5) Restart your computer.
Edit: And since your CDROM doesnt do DMA (I assume its older), make sure in drive manager that it is set to PIO mode, not "DMA if avail."
Edit 2: If you are usin Roxio EZCD thats your problem