Exactly. You can replace the original drive with a pc drive at any time, but it will only read burned dvds and no originals as I said.
The only option would be getting a flashable drive, but these are super rare (even back when the first xbox was released). those can be flashed to read originals.
the modchip really has no influence on this, you could replace the dvd drive of the xbox without a modchip but it won't read any dvds then.
My advice: softmod, replace hdd with a large one, screw original dvds and use them as coasters, upload dvd images to the hdd, profit and forget you ever had to use optical media...