Xbox says play DvD when there is a game in the Disc drive....

Likely that for some reason the Xbox is having a hard time reading the disc and it is spinning the drive trying to search for files on the disk. If you aren't having the same issue with other games then recommend to resolve this issue then simply install the game onto your hard drive and the game will then only need to be accessed for verification only and the game will be played off your hard drive and not your disk drive. Here are the instructions for insalling a game to your hard drive:
Install Xbox 360 games on your hard drive from a game disc Note Installing an Xbox 360 game on a hard drive requires between 4 and 8 gigabytes (GB) of free disc space.

1. Insert the game disc into the disc drive.
   
   
   
   Note After you insert the disc, the default option is to automatically start the game. If the game starts, exit the game, and return to the Xbox Dashboard.


2. From the Xbox Dashboard, go to My Xbox.
3. Select the game you want to install.
4. Press Y on your controller.
5. Select Install to Hard Drive.
   
   
   
   A progress indicator appears while your game is being installed on your hard drive.

Notes

• Installing an Xbox 360 game might take several minutes.
• Multidisc game? Install each disc to your hard drive.

Play a game from your hard drive

1. Insert the game disc into the disc drive.
2. Go to My Xbox, and select the name of the game you want to play.

Note The game disc must be in the disc drive, even though you have installed the game on your hard drive. The console will automatically play the game from your hard drive, but the disc has to be present.

I have never heard this issue before. You probably have a lager issue then what can be resolved here and might face future issue in the future. Is this the only game you are having issues with?

Seeing that you mentioned you have purchased a hard drive then I would recommend you install the game to your hard drive and try play after that. This will resolve any issues possably of your disk drive possably getting hung up during gameplay.

follow these instructions to get your game installed on your hard drive:

Install Xbox 360 games on your hard drive from a game disc Note Installing an Xbox 360 game on a hard drive requires between 4 and 8 gigabytes (GB) of free disc space.

1. Insert the game disc into the disc drive.
   
   
   
   Note After you insert the disc, the default option is to automatically start the game. If the game starts, exit the game, and return to the Xbox Dashboard.


2. From the Xbox Dashboard, go to My Xbox.
3. Select the game you want to install.
4. Press Y on your controller.
5. Select Install to Hard Drive.
   
   
   
   A progress indicator appears while your game is being installed on your hard drive.

Notes

• Installing an Xbox 360 game might take several minutes.
• Multidisc game? Install each disc to your hard drive.

Try getting a disc drive cleaner. (Maxwell).

www.walmart.com is and example retailer.

If you have recently tried to mod your Xbox 360 then you did not get the drive key installed correctly. Otherwise the laser lens is either dirty/ starting to weaken. You can either replace the laser lens in the disc drive, try to clean it, try the POT tweak or replace the whole disc drive. Keep in mind if you replace the disc drive you will need to swap the PCBs or the drive keys. Hope this helps.
GATpro

First some basic steps to troubleshooting

1) Restart your console.
2) Check for loose cables.
3) Pull out all the cables, and get them back in.
4) Take out the hard-drive, and put it back in. Repeat this 4 times.

Try to use several similar Xbox 360-compatible discs in the console to determine whether the disc that you are using is causing the problem. To test whether the problem is caused by a specific disc, use a disc of the same type, such as a game disc, DVD movie, or music CD. If the problem does not occur when you use other discs, that specific disc might be the cause of the problem.

If you suspect that the Xbox 360 device could be causing the problem you can follow these steps

1. If you have access to another Xbox 360 console, try to play the disc on the other console. Or, if the disc is a CD or a DVD, try to play the disc on another device, such as a CD player, a DVD player, or a computer that is equipped to play CDs or DVDs.

2. If you have an Xbox 360 Hard Drive (HDD) or Memory Unit (MU) attached to the console, turn off the console, and remove the HDD and any attached MU. Then, turn on your console, and try the disc again. If this seems to resolve the problem, turn off your console, reattach the HDD and MU, and then delete any saved games for the game that is causing problems.

If this does not resolve the problem but removing the hard disk does, clear the hard disk drive cache

To clear the cache, follow these steps:

1. Move to the System Settings section of the Xbox 360 dashboard.
2. Select Memory.

Highlight a storage device.Do not press the A button, Press the Y button to view the Device Options screen, Select Clear System Cache, and then select Yes to clear the cache.

I presume you do not have a hacked version of Xbox 360 because this problem is prevalent with Xbox 360 dvd drives which are hacked.

if the above steps do not resolve your issue, please send your Xbox 360 to Repairs, call up MS support and check for the charges of Repairs in case your Xbox is not covered under warranty.

Please do rate my solution, Wish you Happy New Year and Happy Gaming

Regards
KreativeGeek

First some basic steps to troubleshooting

1) Restart your console.
2) Check for loose cables.
3) Pull out all the cables, and get them back in.
4) Take out the hard-drive, and put it back in. Repeat this 4 times.

Try to use several similar Xbox 360-compatible discs in the console to determine whether the disc that you are using is causing the problem. To test whether the problem is caused by a specific disc, use a disc of the same type, such as a game disc, DVD movie, or music CD. If the problem does not occur when you use other discs, that specific disc might be the cause of the problem.

For disc-specific issues, check the disc for any visible signs of damage or dirt. Hold the disc by the edges without touching the top or bottom surfaces with your fingers. Clean the disc by using a soft cloth. Lightly wipe from the center outwards. Do not use solvents or chemicals to clean the disc.

If you suspect that the Xbox 360 device could be causing the problem you can follow these steps

1. If you have access to another Xbox 360 console, try to play the disc on the other console. Or, if the disc is a CD or a DVD, try to play the disc on another device, such as a CD player, a DVD player, or a computer that is equipped to play CDs or DVDs.

2. If you have an Xbox 360 Hard Drive (HDD) or Memory Unit (MU) attached to the console, turn off the console, and remove the HDD and any attached MU. Then, turn on your console, and try the disc again. If this seems to resolve the problem, turn off your console, reattach the HDD and MU, and then delete any saved games for the game that is causing problems.

If this does not resolve the problem but removing the hard disk does, clear the hard disk drive cache

To clear the cache, follow these steps:

1. Move to the System Settings section of the Xbox 360 dashboard
2. Select Memory.

Highlight a storage device.Do not press the A button, Press the Y button to view the Device Options screen, Select Clear System Cache, and then select Yes to clear the cache.

I presume you do not have a hacked version of Xbox 360 because this problem is prevalent with Xbox 360 dvd drives which are hacked also if the above steps do not resolve your issue, please send your Xbox 360 to Repairs, call up MS support and check for the charges of Repairs in case your Xbox is not covered under warranty.
Please do take time to rate my solution, Happy Holidays and Happy Gaming

Regards
KreativeGeek

I had the same problem when playing the game, Crackdown, since this game uses the CPU and GPU (chips) very, very heavily. The 2 red lights mean that your system is overheating. Check the Microsoft site to see if your system is still under warranty. If so, call Microsoft and see if they can repair the known and admitted flaw(s) with the Xbox 360 and its cooling issues. You may need to have the "three red rings" issue to take advanage of this free repair though. If the system is out of warranty and you will have to pay to have it repaired by Microsoft, you might as well save a lot of money and do a similar cooling fix yourself. You can start by first searching Youtube for "Taking apart an Xbox 360", "How to fix your Xbox 360" and "Red Ring of Death". You may also be able to search Craigslist for people that will repair and upgrade your Xbox 360 for you, at about $30 to $50 or so.

In case someone is reading this post and having trouble only when playing the game Crackdown, note that this game plays heavily from the DVD and will have many loading issues and lock-ups if the DVD-ROM drive is bad or going bad. You can always test your game disc on another XBOX 360 to see if it is the disc or your system. Game stores will usually help you as well with testing a disc if you bring it in.
Also, try other intensive games to see if they load and play well. This will prove that your system is probably good, but that it most likely is the DVD-ROM drive that is failing.
If you have a game other than Crackdown that locks up, slows down, etc during DVD-ROM play, try copying that disc to the Xbox 360 hard drive and playing it from there to see if it still locks up or slows down as before. This will show you if the DVD-ROM drive is bad or if it is something else in the system.
Unfortunately, Crackdown can not be copied to the hard drive. This was planned by Microsoft. It is not allowed for some reason.

Insert the DVD into the Xbox DVD tray then close the tray.

There's really nothing special you need to do.

Why you replaced the dvd drive i do not know, The problem is if you have installed a non microsoft xbox dvd driver it will not work! If your original dvd driver is broken as to why you have replaced it, contact microsoft or your local games shop for another xbox 360 or drive. You can also by a addon driver, you can see it here
http://www.amazon.com/Xbox-360-HD-DVD-Player/dp/B000JHO4L0

The box isn't loading the decoder softwarer for the Disc. The Xbox discs are encoded HD DVD-ROM discs, and the box needs to recognize them so it can load the decoder software. It probably says "play dvd" on the xbox dashboard right?