I've not been online with it yet as i'm awaiting wireless internet to get set-up at my house. However, as it is the premium system i got i suppose i could cart the console down to my living room and hook the ethernet cable up to this PCand see what happens. I'm sure i've not had any kind of update for the console since i 1st turned it on.
Also, this firmware update would make sense, as the console is fine and the disk is fine as the console recognises it on the dashboard but just won't read it. And the disk isn't dirty and the console doesn't think it is, just says "this disk is unreadable. clean with a cloth, reset the console blah blah etc etc".
Thanks for the advice, it's the only thing i haven't tried yet, bar calling Microsoft for support or Amazon for a refund/replacement.