Have you turned the computer off and on again?
I tried a lot of things to get rid of USB Device not Recognized. I was getting it on all USB devices except the mouse. All USB devices had been working before. I tried to update drivers, even installed XP on a second disk, then dialed a friend. I laughed when he said "Did you turn it off and on again?", but THAT'S WHAT WORKED!
After I shut down XP and pulled the plug out of the computer for a few secs, then powered up - all USB devices recognized, until I came to a camera. USB Device not Recognized. So powered off and on again. All USB devices recognized again (except the camera).
Theory? Probably unplugged the camera when it was switched on. This probably buggered the camera interface. Then whenever the camera was plugged in it put the USB controller into some funny state so that it rejected most USB devices.