LG is probably the cheapest choice and isn't as bad as Matshita (not by a large margin though). I've heard Pioneer makes good slim burners but they're probably more expensive than the other options.
If you want more input this is a good place to start your research: http://club.cdfreaks.com/f61/
You're using the right option ("Write files/folders to disc") for what you want. Also use ISO9660 + Joliet filesystems (look in the Options tab).
The error you've mentioned seems to indicate that your drive doesn't like that CD-RW disc. Can you post the log from that burn attempt? Look in ImgBurn's Help menu.
Try this firmware update (remove any disc and close the tray before updating then reboot the computer after it's finished).
Burn at 8x or 12x for best results, and if it still doesn't work, then try with better media such as Verbatim and Taiyo Yuden.
ImgBurn relies on the information provided by the drive, and it seems your burner doesn't like the Verbatim 8x blanks. Try with the 2.4x Verbatim blanks and it should work
From our tests (have you noticed the Media section? ) Verbatim and Taiyo Yuden blanks give the best results in most burners, and that's why we recommend them
That disc was damaged in a previous failed burn and should be discarded.
Try burning a new one at 4x or 6x, and if that doesn't work, then get the 2.4x Verbatim blanks (MKM-001-00 dye), as they're better supported by most burners.
Please post the log from that burn (look in ImgBurn's Help menu).
It may be worth doing what this post from the FAQ says (removing controllers/etc) as it sounds like a DMA problem
It seems the drive can't read the disc for some reason and the controller where the drive is connected is fumbling the error code
Try cleaning the disc if it isn't clean already. Also try a lens cleaning disc on that drive. You may also want to find the latest drivers for the controller where the drive is connected.
ImgBurn is just a burning tool, i.e. it doesn't convert anything.
You'll have to use another program to generate the DVD content (e.g. VIDEO_TS folder with IFO/BUP/VOB files), which you can then burn using ImgBurn
Try one or two with your burner to see how it works out. If it doesn't work OK then I guess you'll need to get a new burner, which is pretty cheap these days
Have you looked at this thread? Maybe you can find the 2.4x Verbatims in online stores
I tried to get only the firmware flasher out of that package but it's a dead end (they really made an effort in making it almost impossible)
As for "media dye", it's the material used to make the most important part of the disc: the thin film where data is written by the burner and later read by any reader drive/device (read here about it).
Depends on your burner and its firmware. Make sure you have the latest firmware by using the appropriate feature in ImgBurn's Tools menu
Most burners can burn the Verbatim 8x (MKM-003-00 dye) DVD+R DLs at 4x, 6x and 8x; some allow 2.4x and 10x too. You're likely to get the best quality at 4x or 6x on those blanks.