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As a last ditch effort you could try imaging your disks and then mount the images in a virtual optical drive like daemon tools and install that way. I've seen in the past where a drive didn't like some particular media but was able to make a proper disk image of it. Since IWD didn't have any CD-DA redbook audio you can rip it to *.iso as well as other formats supported by whatever virtual drive software you use.
Have you had the bottom layer of the cd stripped? Sometimes when your CD / DVD just gets so bad you KNOW its fucked I just take it into Video Ezy (Dunno about US equivalent or whatever country you come from) and they do it for about five dollars per CD. Basically it just cuts off a ultra fine layer from the disc - and thus, the scratches too. It's worked magic for me a couple of times....
Eh, I gave in to the pressures and just bought the game off of GoG. It's worth it considering I'm pay $10 for a game I really want to play, plus an expansion I never had.

Thanks for all the help, guys and gals!
I thought about that, GameRager, but I figured the following:

Although I may have the legal right to a torrent, but why not just pay $9.99 and get an expansion, wallpapers, soundtrack, manuals, etc, PLUS having the game on every computer I own. I'll never have to look for the disks again.

You know?
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Xelica: Maybe I'll just buy it. If I download the game on this computer, is it only available on THIS computer? Or can I also download it on my home computer? I mean, I bought it, so I should be able to, right?
Also, would the final price be $9.99, or $10.69(Tax)?
There's no DRM, it will install anywhere.
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Xelica: Maybe I'll just buy it. If I download the game on this computer, is it only available on THIS computer? Or can I also download it on my home computer? I mean, I bought it, so I should be able to, right?
Also, would the final price be $9.99, or $10.69(Tax)?
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orcishgamer: There's no DRM, it will install anywhere.
By "no DRM", he means you will download an installer that Just Works, with no limitations. AFAIK GOG doesn't bother adding sales tax on, since they're European and Europeans like to include sales tax in the price.