I had a very frustrating experience with my new iPod on my Windows XP Pro laptop, which took many days and many dollars to resolve. I figured I'd add the details here to this already good post for further reference, since my issue is nearly identical.
My laptop is a Dell latitude D600, with Win XP Pro SP2. Has USB2 ports but they are flakey (long story, not relevant here) so I had already purchased a PC Card USB2 / Firewire card. The USB2 function of this card has been used extensively and works well with a variety of hard drives and other USB2 devices.
1) Loaded iTunes on laptop, connected iPod to laptop on this USB2 card.
2) iPod goes into 'Do Not Disconnect' mode, but iTunes does not recognize.
3) eventually called Apple tech support. After an hour on hold, with very frustrating 20-second updates telling me to stay on the line, I got through to a pretty darned good support guy who obviously knew his stuff in general and was determined and patient.
4) After an hour of 'trying everything under the sun', we decided to try one of my other computers. The one chosen was a win2k SP4 desktop machine with USB2 hardware. It worked like a charm immediately.
5) we concluded that there must be an issue with my laptop PC Card USB2 card, which uses the 'VIA' chipset.
6) Went out and spent $50 for a belken USB2 PC Card - the one recommended on Apple's site. Same problem
7) Finally realised that, when the iPod was plugged in, if I 'hovered over' the 'eject' icon (safely remove ...) in the win XP tray, it would show a 'mass storage device' but it did NOT have a drive letter.
8) I then remembered that this is an age-old problem ... (and that's where the similarity to this thread comes in) - if you have mapped network drives in the 'low letter range' - D:, E:, etc - I do - Win XP will 'double up' on these drive letters for a new device, and the new device doesn't work.
9) I ran disk manager (Start/Run ... diskmgmt.msc) and sure enough, there was the ipod assigned the "D:" drive letter, even though I was actively using files sitting on my network mapped 'D:' drive.
10) I changed the drive letter to M: and ... suddenly, the iPod showed up in iTunes.
Hope this helps others!