USB 2.0
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Works straight out of the box with my kernel 2.6.7.

USB 1.1
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Works, basically. You certainly don't need any third party drivers for anything.

To begin with, I had some quirky results with the CD burning (sometimes it would fail unexpectedly) but this was solved by compiling my kernel with my USB controller and the USB Mass Storage in the kernel (rather than loading as modules). Also, for K3B I changed the device to 4x speed on the configuration menu -- that is about as fast as you get with USB 1.1. It then worked reliably.

General stuff
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Reading data CDs and data DVDs is fine.

Playing DVDs works but I haven't tested extensively. I've only tried USB 1.1. I noticed that the DVD player didn't seem to want to eject the disk after playing.

Playing Audio CDs is fine. Use digital audio extraction. For instance, on my machine, I did the following in XMMS:

1. Right Click -> Options -> Preferences
2. On the Audio IO Plugins tab, select CD Player and click Configure
3. If you already have another audio CD playing drive, first add a new player by clicking "Add Drive"
4. Enter the device and directory for your USB drive. On my machine, it was /dev/scd0 or /dev/sr0. I had set up a symlink called /dev/dvd and added /mnt/dvd for this device to /etc/fstab.
5. Change "play mode" to digital audio extraction.

Play directory to hear sweet music!

Things I haven't tested
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My computer is too old to boot from USB devices, so I haven't tested this.

I haven't tried burning audio CDs yet, only data CDs and ISO images.