The other thing to keep in mind is that Windows by it's nature remembers what was in the drive last time it was used...
Therefore if the last disc was a CD it'll report the drive errantly as a CD drive...instead of what it is.
Just one of those quirks.
Windows through to 2000 identified all Optical Disc Drives as Compact Disc or CD-ROM Drives.
Windows XP and Later correctly identify media types (XP) and/or drive types (Vista,7,8). Vista, 7, and 8 all correctly identify a drive as a DVD-RW Drive even with an Audio CD in the drive.
The Drive capabilities used to determine this are part of the built-in Driver. Interestingly, sometimes the Driver stack used for this purpose can become corrupted or otherwise encounter problems.
The Driver stack for the Optical Drive can be refreshed from device manager.
1. Enter Device Manager (Windows Key+R, devmgmt.msc <enter>
2. Find the Optical Drive. It will be in DVD/CD-ROM Drives or a similar node of the tree.
3. Right-click and choose Uninstall.
4. Reboot
When the system restarts it will reinstall the default Driver, this time re-writing the configuration entries. This could fix corruption caused by programs like registry cleaners (ironically) or even malware removal.
My only other guess for why this could be happening would be if one of the four lasers had failed. (CD read/write, DVD read/write), if the DVD laser fails for example it might be reporting itself as a CD-ROM drive, though that sort of functionality doesn't seem like something that would generally be added to a device. This is assuming that the OS calls it a CD-ROM drive even at My Computer, where it would (Vista and later) identify the appropriate capabilities as DVD-RW. If it is simply only readong CD-ROM discs than it is definitely what Geek-pm mentioned- a failure of one of the lasers.