Thanks for all the suggestions- we had already tried the XLR DVD in the house and it works fine, and a regular movie DVD doesn't work in the car...
guess I have to go back to the dealership, again.
I had the occasional "the disc is initializing" problem when trying to use the nav system's voice recognition (mostly used for changing between XM1 and XM2). The dealership replaced the Nav unit and the problem has gone away. DVDs were playing fine and I wasn't having a problem with reading the map data.
So, the only thing I can guess is that the voice recognition software (which is on the Nav disc) is located on either the inner or outer part of the map disc. My unit must have had a slight mistracking that prevented accurate reading of just that part of the disc. With error correction sometimes it would work and sometimes it wouldn't. Overall, the mistracking must have been small but enough to keep from reading part of the disc.
So, just because you can read part of a disc doesn't mean that the disc reading mechanism is working perfectly. There are test discs available to check the overall read capability.
As for a CD insertion problem - that could be as simple as the cable was not connected properly or as difficult as a misaligned CD unit. Either way I would not try to insert a CD I cared about until the problem was fixed and I was sure it was fixed. The CD changers can scratch discs when they aren't working properly. If it is just a loose or non-connected cable to the changer (or bent pin), then the unit should still be good.