First, Welcome to FlyerTalk!!!

Second, are you certain it is not a digital photo?

I looked at various sites and from the data you supply in your post, it would seem that a new passport would be needed to use VWP, or a visa would need to be obtained.

This pdf file lays it out pretty well:
http://www.cbp.gov/linkhandler/cgov/...p_timeline.pdf

Not sure if anything has changed since you last visited the US with your current passport, but it certainly is possible that the fact that the photo wasn't digital (if true) was overlooked or ignored.

The only exceptions I saw were:
Temporary, emergency, official and diplomatic passports are exempted from biometric digital photo and chip requirements, but must be machine-readable. Note that German temporary or emergency passports are not included in this biometric e-passport exemption.

Do you fall into any of those categories?