Xbox Dashboard update has created a little hiccup for those who want an inserted disc to load immediately after switching on the console. The issue being: it won't, even if the option is selected from system settings. Microsoft is aware of the situation, and Major Nelson tells us the option "WILL return in a future update."
In the meantime, check out the official Microsoft support article for obvious workarounds. Like: 1. Go to "My Xbox." 2. Select the first panel to "Play Disc."