It took a while, but I finally located a FAQ, http://dvddemystified.com/dvdfaq.html, as the apparent source of the internet misinformation that paper labels on DVDR's can "unbalance" them and cause "read errors".

Quote the FAQ (as of 1-7-2007):
"[1.44] Is it ok to put labels or magnetic strips on DVDs?
Labels and adhesive strips are dangerous because they can unbalance the disc and cause errors..." (end of quote)

This is being widely repeated as fact when it is quite untrue. In the interests of accuracy, I requested the author to amend the FAQ to correct this. There has been no response, however, so I am only able to place this on the internet as counter-information.

Update as of 02-08-2007. The FAQ author responded! He amended the FAQ to read:
[1.44] Is it ok to put labels or magnetic strips on DVDs? It depends on the label. If a label or adhesive strip is heavy enough it can unbalance the disc and cause read errors or slow down the disc speed. This is especially a problem with magnetic strips for library or rental store security. As DVD-ROM drives get faster and faster, an unbalanced becomes more critical. DVD players and drives are designed to compensate for unbalanced discs, so a thin, light label is usually ok.

My original argument: A small paper label applied to a disk cannot contribute enough mass to cause a disk to become unbalanced to a large enough extent to affect the read process.

When a disk is unbalanced, a phenomenon called "runout" occurs. This causes the servo track to trace out a sine wave whose frequency is the same as the rotational velocity. Modern optical servos can do this - tracking the oval is required to attain the high speeds, like 48X in CD drives. As long as the servo can follow the runout, the read/write head remains positioned properly in the track, and no read or write errors occur. Long before a read error happens, the servo system detects that it cannot follow the track, and the servo controller reduces the rotational velocity. Errors can always be eliminated by reducing the rotational speed.

This means that there is an easy test if you are unconvinced. Take a disk and put a large file on it. Then time the transfer of the large file as it is read by your optical drive. Then add the unbalancing weight to the disk, and time the transfer. If the weight was enough to cause runout to the extent that the servo could no longer track the data, the rotational speed would be reduced by the servo controller and you would observe a longer file transfer time. You can do this experiment yourself. I've done it. Small, thin stick-on labels are far too light to cause significant runout, and therefore they have no effect on servo tracking, and therefore no effect on read errors at all.

As a matter of scale, the manufacturing precision of a typical optical disk causes a fair amount of runout to be present in a percentage of blank disks. This is the real issue and it is a much larger mass than a paper label.

On the other hand, the original FAQ was correct that a badly chosen label can cause a nasty problem. The key failing point of labels is their corners. As corners peel up, they eventually engage the servo or the head carriage and jam the drive. Typical Avery labels have this problem. The labels with the best adhesion that I've found are Pinnacle brand. The problem can also be eliminated by eliminating the corners - in other words, use a round or oval label. This works well when the label is about 1.5 inches in diameter. I've made thousands of dvdr's with the 1.5 inch round labels. In no cases have I been able to observe either peeling labels, jammed drives, or read problems. In my case, I use Avery #8293 Round Labels which I buy from Labelspro or Pinnacle 4020 labels from Paper-papers.com. If you must use square or rectangular labels, I recommend only using high-adhesion labels such as those made by Pinnacle, available from the latter source.

This page is still serving as counter-information. This should eventually slow down the spread of the "labels can cause read errors" internet rumor. My credentials - I'm a former hard disk drive servo engineer and consultant, 18 years in the business, with 5 patents relating to rotating memory servo systems. I now work in instrumentation and control systems.