You've covered all the bases there, Jay- for whatever reason there is something keeping the system from reading that portion of the disc. It is likely a scratch on the disc. If it was a matter of a dirty lens it would have kicked in being unplayable long before that portion.
Your best options would be, if it is a scratched disc, to have it repaired (check around various game or music stores, there should be someone that offers this) or try to exchange it for another copy of the game wherever you bought it to.