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I believe your PS2 has a short circuit and needs another motherboard.
If you can do this yourself, that's great. You can find Motherboards or
a PS2 like yours that will not read discs or has Disc Read Errors but will
boot up for about $25 on Ebay. If you're not comfortable with Changing
out your motherboard, then click on the "Repair directory" at the bottom
of this screen. On the Repair Directory Screen, select Video Game
Consoles. Choose a good Repair shop.
turn console onto standby and leave a min then hold button in till it beeps 3 times and release then do this again it will beep 3 times last one being double quick beep a menu should appear click on the one that says files this will restore your lens reader
two problems. 1) not reading games or movies is due to a bad laser. It needs to be replaced depending on the model it will take a kes-400aaa(60,80gb and some 40gb) or kes-410a all newer ps3's use this laser. 2) Crashing online can be due to the system over heating. Make sure the system is horizontal never stand them up verticle this causes serious cooling issues. Also these units do get filled with dust and animal hair which cloags the vents. I have noticed that the ps3 runs much hotter when a wireless internet connection.