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It sounds like you have done your homework, I suggest checking out ebay for a replacement for your CD-ROM, new would be better, but if you want to save money you might be able to scoop up a good used one at a cheap price.
That blinking cursor is the way in which the BIOS is telling you that Windows is missing - its most critical, core files have been corrupted beyond repair. The only thing you can do is to reinstall using the recovery cd or your own Windows install disk.If you can't complete the reinstall or it fails immediately after it then it;s hardware - the motherboard has failed. Time for a new one.
What happens when you insert a DVD/CD? If inserting one immediately locks the laptop, and you have already tried uninstalled and reinstalling the drive, its time to purchase another DVD drive for your laptop.
Try removing the dvd software and reinstalling it. I had this happen on a Sony Vaio and then after the computer crashed and I reinstalled everything, the dvd player worked. I tried downloading updates for the WinDvd software, but that didn't fix it. If the cdrom unit is bad, then it is a lost cause and too pricey to replace, unless you get a scrap part laptop.