My A500 won't even POST if the external SCSI DVD drive is plugged in but not turned on. Powered on (no disc needed) it boots normally, I think this has to do with how I set up termination, is no big deal. Disc changes are recognized normally, etc.
So I would guess that your first issue (not booting if the drive is off) is "normal". Your second issue - needing a disc in the drive - is there something in your Startup-Sequence that's checking for presence of a disc in the drive and causing it to stop?
