I've found that just using some liquid soap and water, then gently drying them with a towel works well. I'd be concerned about lip balm leaving buildup on the cd players laser. I know the laser doesn't touch the cd, but why risk ruining your player?
Lip balm for CD scratches?
I was browsing through my wifes First magazine (bathroom reading of course) and came across a page extolling the many uses of lip balm, with one of them being for filling in scratches on CD's and then lightly buffing afterwards. Anyone ever try this? It certainly sounds easy and cheap enough.