The exact same thing happened to my 2002 Xbox about 3 weeks ago. I replaced the disc drive and now it works perfectly again. It cost me about 25 bucks to buy and it's super easy to install yourself, just find a guide. The old Xboxs from 2001-2002 used a crappy disc drive that goes out over time. You'll have to buy a new one. I got mine at www.vpgames.com.
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