I got this once after I had moved the source file to my system disk and then back to the original (slave) disk, after I had completed the scene detection and project creation. The solution which worked for me was to delete the old .scn (scene) and .stu (project) files, defrag the slave disk, redo the scene detection and rebuild the project in that order. Once I completed these steps I was able to complete the DVD burn successfully.
It would appear that Pinnacle Studio uses more than just file descriptors for references to source video in both the scene and project definitions. If it uses sector references on the hard disk (or some-such low-level hard disk reference), that would explain why the read error occurred.
The theory is that once the scene and project definitions have been started you shouldn't do anything to the source files (e.g. move, alter or defrag) or else it could potentially cause post-processing failures.
Anyone concur or have other comments/suggestions?