Question : Problem: New USB Devices No Longer Recognized

I recently plugged a new USB device into my Windows XP computer, and Windows XP, even though it has been able to every time in the past, claims it could not find the device driver.  Some basic facts to prevent responses suggesting things I've already tried:

1. This is the same whether it's a mouse, flash drive, external hard drive, etc.
2. Anything that is already installed on the system on an existing USB port still works, even if I unplug it and plug it back in, but it MUST be plugged into the SAME port.  In other words, if I move ANY of those existing devices to a new USB port on the same computer...Windows XP says that it cannot find the driver.
3. Ive gone to Device Manager and tried to click on Update Driver on the device with the Yellow Exclamation Point, but that didnt work.
4. I tried to restart Windows in Safe Mode, delete the drivers, and have Windows automatically reinstall the drivers when Windows reboots....no luck.
5. I CAN install new devices IF they have drivers with them, but simple devices such as a new USB mouse should never require the manufacturers driver disk...it should would as a generic USB mouse or Mass Storage Device or whatever.
6. I have always been able to plug new USB devices in, in the past, with the ability to move them to any USB port internally on the computer, and through my external USB hub.
7. It seems that there are others with this same problem as well.
8. Its not a hardware issue.  I exchanged the hard drive on my laptop with my backup laptop, and the same issue still exists.
9. It started sometime around the same time that I installed SP3, and a Bluetooth USB Marble Mouse software package from Logitech.  I tried to uninstall the Logitech software, but it crashed during the removal. I went to a Restore Point that rolled the computer back to BEFORE the Logitech software installation, but the USB still has the same driver not found, even though the device is recognized.
10. I even tried to manually point the installation to the C:\Windows\System32\Drivers folder, and even though the driver is sitting in the folder, the OK button remains grayed out, and I am unable to choose that folder.
11. I have ESET antivirus and tried to disable that during the installation, but still no go.
12. I scanned and rescanned for any viruses and my computer is clean.

So, if anyone can think of any possible reason why a USB device is recognized when I plug it in, but Windows XP refuses to find the driver, it would be greatly appreciated.  My only guesses that are left is that SP3 did something strange to my system, not allowing me to read from the system32\drivers folder.  

One final note:  I just installed a Kensington USB Trackball that Windows XP recognized and automatically found the driver for, but it was ONLY when I placed the installation disk that came with the trackball in the drive.  With no disk, Windows XP should install a generic mouse driver, but it doesnt.

And no, I have not uninstalled SP3 yet.  That will be one of my absolute last resorts...

Answer : Problem: New USB Devices No Longer Recognized

> 10. I even tried to manually point the installation to the C:\Windows\System32\Drivers folder,
> and even though the driver is sitting in the folder, the OK button remains grayed out, and
> I am unable to choose that folder.

Use this way and choose \windows\inf folder as a source.
Look if this directory still exists and if there are lot of files in.
In my \windows\inf dir are more then 1000 files. It is the repository for all links to device drivers.