Are you using the recovery image from the Psfreedom site ? or some other build (I know there was an open desire 4.0.4 one, and some others)
If its the recovery image, then you need to choose either
"Blu-Ray emulation: This is the standard payload with Blu-Ray emulation support, which allows you to play backups."
"Blu-Ray emulation with peek/poke: This is the same as "Blu-Ray emulation", with additional peek and poke system calls. It is based on the PSGroove 1.1 payload."
If you choose either of the other two, it will fail to load [b]backups[/i]
Make sure you butter the non reflective side of your CD's / DVD's and Blu-Rays so that when you drop them, they land butter side down thus preventing scratches.