Greetings, all! --I just found a new and working solution to this problem; one which has never been mentioned before on this forum.
First of all. . . I just spent a LONG time reading through this entire thread, which began back in 2006, and from what I gather, the problem is the result of one of the Microsoft Security Updates. The problem cropped up globally at the same time for hundreds of people, and since then, presumably, whenever the update installs or some variant on the update code is installs itself.
Without knowing that the Microsoft Security Update code was the culprit, people have been struggling and have come up with two basic tactics discussed at length in this forum and used with some limited success...
1) Flush the USB drivers from the system and let Windows install them again.
2) Waiting for the whatever information is stored to fade out when the system remains without power for 30 minutes.
A third solution was mentioned once a year or two ago involving uninstalling two Windows Security Updates which had presumably been interfering with USB functionality. --Though neither of those updates were on my system, probably because I was using much more recently built versions of the service packs, (SP3) so I couldn't try that.
Okay. So now the solution which DID work for me. . .
A conflict with a device driver involving Firewire and/or a network card. Disabling the 1394 and/or 1384 devices in Network Connections for many people will restore USB functionality. This can also be done through the WinXP Device Manager.
Please refer to the following forum thread to see a detailed discussion of this solution. . .
http://en.kioskea.net/forum/affich-21877-windows-xp-won-t-recognize-wd-ext-hard-drive
This solved it for me, and I hope it helps other people struggling with faulty USB connections.
Cheers and good luck!