>> If I open the CD drive it has all the files I have copied but it I click on 'copy files to CD' a message comes up saying that Windows is currently using the CD...
That to me reads as if you have all the files on a disc in the cd disc drive and then want to copy them onto another disc but cant as the original disc is in the disc drive....
If that is the case the files need to be on the hard drive usually called local disc or (C) and then you can copy. or put disc in another disc drive if you have one.
If they are already on the hard drive then as shadbolts said... its probably got confused and needs another cup of coffee :D
Although sometimes i have found that i can only copy some files from certain programmes ie a music file for instance has to be done through media player. too me awhile to work that one out, windows Xp dont you just love it :D