Hi everyone. I've been having just about the same problem here. A while back I was using a Dell Pentium 4 PC and my iPod/iTunes worked fine with that (although the PC itself was horrid) but recently after building myself a new Core2Duo-based PC, I've not been able to get Windows XP to recognise my ipod. Every time I plug in the ipod the same "USB Device Not Recognized" bubble pops up and under device manager it shows up as "Unknown Device".
I've searched the web for 3 days already and I've done every thing suggested with the exception of uninstalling all my usb drivers. The reason I did not try this is cos I'm using a USB keyboard and mouse and am afraid that I will not be able to use the computer at all if they're not recognised (due to drivers being uninstalled plus I don't readily have a ps2 mouse/keyboard at the moment), although I'm not sure if this will be the case as my BIOS appears to support USB mice/keyboards at startup (it can be disabled as well).
The weird thing is that all my other USB devices work with absolutely no problem whatsoever, no matter which USB port I plug them into. Apart from the keyboard and mouse I'm also using a Canon printer, a Wacom tablet and at times I plug in my Playstation Portable to transfer stuff to and from my pc - all via USB, and with no problem at all. The only thing that seems to be causing this is the iPod.
I really hope that this is some kinda software bug that can and will be ironed out soon. I'm not a fanboy, but I like Apple products and I could have bought any MP3 player but chose the (generally more expensive) iPod cos I've never had a problem with Apple's stuff in the past. I'm not jumping to conclusions, don't get me wrong, but I would be really disappointed if this is something that's going to cause me to shell out more money to fix.
EDIT: I forgot to mention that I tried plugging the ipod into my sister's PC and the same problem persists. With both my PC and her's, the iPod charges thru the USB connection but refuses to be recognized, not even as a drive under "My Computer".