First, is this a Original Xbox or a 360?
If it is an original, the drive could have just gone bad. Typically the thompson model drives fail because of cheap parts. To identify your version number and possibly what drive visit:
LLAMMA's XBOX PAGE: Repair Diagnose & Modify the X-box
You can replace the parts your self, or send it to them. However, Microsoft has stopped support on the Original Xbox, so you cannot fall back on there. You can believe it or not, sell xboxs on ebay with broken drives for $50-$80. Which is not that bad, since a used one at Gamestop is $109.99
If this is a xbox 360 and the drive has indeed, gone to waste on you. All is not lost, you can contact Microsoft, and they can arrange for it to be fixed.