You should try to burn another game than FFXII first, cause I saw on another forum there is something special you must change on this iso to make it work.
1) Zalder is right I read a few posts stating the same thing about the Final fantasy XII game. Try looking it up on some forums, you may get your answer there.
2) As far as the laser going bad there is a way to check it. Try adjusting the angle of the laser. And also the amount of ohms it uses to read CD's and DVD's. If that solves the problem then it's your laser (which I really doubt if it plays other backups and like Zalder said I do belive there is something special you have to do). Try googling a tutorial on how to do this. If you need more information let me know and I can send you some tutorials that will help you out.
3)HD Loader is definatly the way to go !! If you need help installing the exploit to your memory card I can help you with that and also give you alot of good resources. It is definatly worth it though. No game freezing - Faster Load Time - And No CD-Swapping !! Just 1 PSX game in the drive at all times (unless you put other stuff on the HD but I would suggest using a usb stick for that). And Installing the exploit will be very easy for you considering you have a mod chip.
Good Luck
P.S - I would defintly go with the memory card exploit because it gives your PS2 more functionality. Heres what you can do :
-Play Mp3's (using a media ELF such as SMS, MediaPlayerPro, MyPS2, ect..)
-Play AVI files (using a media player ELF)
-View Jpegs (images)
-Save games to the HD (HDLOader)
-Backup your memory card (MyPS2, PS2OS, and any other file manager)
-Use emulators and roms (Pgen{Sega}, SnesStation{Super Nintendo}, ItmbNES{Nintendo}, ect ...)
-Connect your PC to Your PS2 to transfer files (you'll install the exploit this way and you can also download gamesaves and other elf files and put them on your memory card this way)
-There's too much to name so i'm stopping here :P
*Just be carefull when using some of the partition programs such as HDFormat or PS2OS partion maker. If you don't know what you are doing or need help with partitioning then ask on the forums.
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-LightOn DVD-Ram Drive (DVD-Burner)
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-Windows XP SP2 & Direct x 9.0c
** The DRK PS2 **
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