This is from foggy memory (I run OS X and gave away my USB burner):
In the Extensions Manager, make sure that USB Authoring Support and FireWire Authoring Support are unchecked, and make sure that Toast Firewire, Toast USB (A, B, & C), and Toast CD Reader are checked.
Also make sure that Disk Burner extension is unchecked.
Reboot.
However, you may need to upgrade to OS 9--since I'm unsure if those plug-ins are even present in 8.6.
Actually, after checking Roxio's website, OS 9.1 is the minimum OS to run Toast 5.
edit: Woops, didn't see that the CD-RW works fine in 8.6. You may need to fiddle with extensions. There seems to be a Canon one that's interfering--probably the one that deals with connecting the camera to USB (storage or something)--again I'm a bit hazy.