Well basically DVD burner diodes can be of two types, short and long die.
Short die diodes only come in short can package. Like I stated before, these only output around 100mW max.
Long die diodes can come in long can, or open can package. These are the ones you want if you are building a red laser.
Oclaro 635nm diodes are much different than that - different color (wavelength), operating voltage, and beam characteristics. Basically they don't produce a nice dot the way DVD diodes do.
In that schematic, just plug in the current you need.
For example you want 800mA? That would be;
Resistance = 1.25 Volts / 0.8 Amperes
Resistance = 1.56 Ohms
This also works the other way around;
Current = 1.25 Volts / 2.2 ohms
Current = 0.56 A, 560 mA
I hope that's clearer a bit
Waiting on pics of the setup, so we can get a stab at figuring out why your diode isn't outputting much power. My current guess is that you have overdriven it at some point, and if it was a short can diode, it couldn't handle the current and it went LED... hmm but you are saying that the diode is very bright, just doesn't burn anything.
It's also possible you're actually underdriving it. I would suggest replacing all the resistors in your setup with something as close to 6 ohms you can get. This will give you around 200mA current of output. At this current, both short and long can diodes should output around 100mW of power and be able to damage things