Ok, I'm having a hard time following you, here. Let me recap, to ensure that I understand.
You're trying to reinstall Windows 2000.
You have a laptop with an external CDRW drive, with a USB interface.
When the USB CDRW drive is connected, the internal CD drive will not boot.
Must you perform an upgrade install? What happens if you disconnect the USB drive, and simply boot from the internal CD drive to install your OS from? Do you have the latest BIOS update from Toshiba's web site? Have you checked the boot order??
Correct me if I'm wrong above, as I said, I'm not really clear.