Hmmm . . . stuck CD, GB disappeared . . .LW not working . . .
This sounds like something is more messed with your system than it first seemed.

OK. Not sure what the hardware problem indicates. Probably needs to be fixed first.

Anyway, if there is a deeper problem with your system, a Safe Boot won't help, but can't hurt. Heh, might as well try the easiest fix first, right? Better than setting up a new OS X account, or reinstalling the system.

Here's the info What is Safe Boot, Safe Mode? (Mac OS X)

To do a Safe Boot, follow the link above, or just click here for instructions Mac OS X: Starting up in Safe Mode

After the Safe Boot, run Software Update again.