To find out whether or not dma is on type
hdparm -d /dev/hdc with no number following the "d". This simply reports the current state of your disc. This will confirm for you if dma is on or not. If hdparm says it's on and xine says it's off then there's something writing with xine most likely.
I know nothing about ati cards but I can tell you your CD/DVD drive is not separated in two. It's ALL /dev/hdc (assuming that's the correct device).
To enable SCSI emulation you have to load the ide-scsi module and put a line saying:
Code:
append="/dev/hdc=ide-scsi"
In your lilo.conf and rerun lilo. Your CD/DVD drive will no longer be called /dev/hdc but /dev/sr0 (or /dev/scd0) after emulation.