I found the solution - I hope this helps someone. The disk itself can't just be launched the same way you launch a game. You have to go into your "Arcade games" section and they will be listed there. you can launch from there.
Oddly enough, I found that info here, where I bought my copy:
http://www.game-fanatix.com/360-xbox-live-arcade-unplugged-used.htmlWorked for me!