I own 5 Asus 52x CD-ROM drives, with firmwares ranging from 1.7K - 1.9K (though they all perform identically in subjective and objective benchmarks).
1. Yes, the Asus CD-S520 supports C2 error reporting.
2. It performs well with the RW media I have tried (24X Yamaha, 12X Verbatim and 12X Memorex 700MB - the Memorex is awful BTW).
3. It has read all of my scratched media (and I have plenty of those) except one; it's an aging copy of Led Zeppelin II.
All five drives have performed admirably in their tenure, and all are the quietest in their class (of course still loud when compared to the old 12x drives of yore). On a side note, NewEgg has began offering sexy black Asus CD-S520s for only $30 (though I know it doesn't really help you in Israel, Dodecahedron).
Drives I Own:
Asus S520/A, Plextor UltraPlex 40TSi, Lite-on XJ-HD166S, Pioneer DVD-106S, Toshiba SD-M1712, Plextor PX-R820Ti, Plextor PX-W1210TS, Plextor Premium, Samsung SM-352B, Teac CD-W540E, Yamaha CRW-F1, Plextor PX-708A, Sony DRU-510A