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As an FYI the following link explains how to create a bootable USB drive from the Snow Leopard media. I just followed them and can confirm it works on a late 2006 Macbook. Though I'm not sure how helpful this will be if you can't use either of your optical drives:

http://computers.tutsplus.com/tutor...e-usb-drive-with-os-x-snow-leopard--cms-21491

I tried that.

When I connected the external optical drive, it spun, and the Snow Leopard DVD briefly appeared on the left in Disk Utility, but then disappeared. It kept spinning, and DU stopped responding. I had to force quit, but when I relaunched it, it immediately froze again. This happened several times. I tried to eject the DVD, but then the whole machine completely froze. Even the dock froze- I usually keep it invisible, with the icons enlarging as they're moused over- it froze with some icons enlarged.

I restarted and tried again. This time nothing crashed, but the DVD just wouldn't stay in DU. It kept appearing for less than a second and then vanishing.

----------

I'm wondering if there's something wrong with my computer's ability to read OSX DVDs, like some piece of code that allows it to do that broke. Is that a thing that could happen?

If that's what it is, I'm wondering if I should buy Lion from Apple. $20 isn't so much to pay to get a functioning machine back. Then I could try putting Lion on a thumb drive and see if that works. If it does, then I could use it to do a clean install on a new SSD, and hopefully leave whatever demons are causing this behind.
 
I tried that.

When I connected the external optical drive, it spun, and the Snow Leopard DVD briefly appeared on the left in Disk Utility, but then disappeared. It kept spinning, and DU stopped responding. I had to force quit, but when I relaunched it, it immediately froze again. This happened several times. I tried to eject the DVD, but then the whole machine completely froze. Even the dock froze- I usually keep it invisible, with the icons enlarging as they're moused over- it froze with some icons enlarged.

I restarted and tried again. This time nothing crashed, but the DVD just wouldn't stay in DU. It kept appearing for less than a second and then vanishing.

----------

I'm wondering if there's something wrong with my computer's ability to read OSX DVDs, like some piece of code that allows it to do that broke. Is that a thing that could happen?

If that's what it is, I'm wondering if I should buy Lion from Apple. $20 isn't so much to pay to get a functioning machine back. Then I could try putting Lion on a thumb drive and see if that works. If it does, then I could use it to do a clean install on a new SSD, and hopefully leave whatever demons are causing this behind.

Multiple things come to mind here:
  • The internal optial drive is bad.
  • The external optical drive may not be as compatibile with the Macbook as the manufacturer suggests. Can you provide the manufacturer / make / model?
  • Perhaps the failing hard disk is causing problems with the optical drive. Given these are SATA devices the two drives are not phyiscally on the same bus so signaling interference is unlikely. My recommendation is to pull the hard disk and then try both optical drives.

I assume since you're having problems with the optical drives you're unable to make a disk image from the Snow Leopard media. Is that assumption correct?
 
Yes, I can't get either optical drive to read either install disc, so I'm unable to make a disk image from them.

I'm about to pull the HD and see if that works. I'll report back once I'm up and running again.

Thanks again for your help!
 
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