OK. I found the answer. Guess I didn't search the kb well enough before I posted.
Basically, you have to restart the hostd daemon after adding the USB CD/DVD device by doing:
/etc/init.d/hostd restart
from the service console. That causes ESXi to rescan the USB devices and the USB CD/DVD drive is then available to be mapped as a host device to a virtual CD drive in the VM. It's not as good as being able to use it right away, but at least it doesn't require the host to be rebooted each time.