I just got the New $99 special DC also...The boot disc don't work and DOA 2 don't work on mine either, but it worked on my friend. The boot and DOA2 is on the green tinted CDs. Bangai-O do work but the CDs are black like the PSX. Maybe that is the soltution...burn on black CDs.

Will let you know if my theory is correct, just got DC like 4 days ago. I even exchange the machine for another one and still the same problem. Going to test out the Black CDs theory now.