I've been banned since the halo 3 beta... Can I play wave 3 games without upgrading?

yeah, just not online.

So what's up with the dirty disc error and all that?

Either the backup iso is faulty or you have a weak laser maybe? Which program are you using to rip your 360 games and which drive are you using?

I thought any iXtreme firmware prior to 1.51 wouldn't play any Wave 3 game at all (including retail disks) due to it not recognising the new partition and therefore assuming the disk is not properly stealth patched.

tariqosuave - if you've been banned then I'm assuming you have custom firmware. Do you know which version you have?
If you can't get Wave 3 games to boot then I'm assuming you have pre-1.51 iXtreme firmware (so v1, 1.2, 1.3 or 1.4). If that's the case then you will have to either update to 1.51 or 1.6 for the firmware to recognise Wave 3 games or downgrade to old Xtreme firmware.