Windows can be configured to hide drive letters in the Windows Explorer. The settings can be made with Microsoft TweakUI under My Computer -> Drives. Or download and execute this reg file: explorer_nodrives_0.reg

TrueImage 2009

TrueImage 2009 Home may prevent Windows from assingning drive letters to removable drives. An update to "Build #9615" fixes this.

Drive Letter Conflict with Network or Subst Drives

Since XP Network and Subst drives are no more global, they exist in the context of the user who created them only. In the context 'System' where the Mount Manager assigns drive letters such drives are not visible offhand. Therefore they are not considered by XP. If there is a network drive on the first available local letter then XP assigns it again to a new external drive. The external drive is invisible and unaccessible then until its drive letter is changed in the Disk Management (right click My Computer -> Manage -> Disk management) or by my commandline tool ReMount. But for each new drive you have to change the drive letter again and it's no solution to assign a letter again to a different external drive because XP can save exactly one assignment per letter.
So change the network drive's letter to a higher one to get the lower ones available for external drives. Or let my USB Drive Letter Manager change the letters of USB drives for you.
Microsoft is aware of this and calls it a problem. Meanwhile a hotfix is available (WindowsXP-KB297694-x86-ENU.exe) and the XP Service Pack 3 fixes the problem too.
What the SP3 did not fix is this scenario: Letters C: + D: used for local drives, E: for an USB drive. Remove the USB drive, create a network drive at E: and reattach the the USB drive again. XP with SP3 will assign E: anyway, the USB drive is 'hidden'. This is fixed in Vista.
The problem persists when an external drive is attached before the user logs on. The mapping of the network drives fails when their drive letter is in use. USBDLM fixes this when configured appropriate.

New external drive not partitioned

New external drives are often unformatted and unpartitioned. Partitioning can be done in the Windows Disk Management (right click My Computer -> Manage -> Disk management) or see here.

Windows Server 2003

Windows Server 2003 Enterprise and DataCenter Edition do not assign drive letters to new fixed drives (USB and Firewire disks are usually 'fixed'). This is up to the administrator because otherwise SAN (Storage Area Network) drives might be mounted accidentally.
This feature is called AutoMount and can be enabled by means of the DiskPart tool: Open a commandprompt, enter diskpart, on the DiskPart prompt enter automount to see the current state or automount enable to enable it.
Or install my USB drive letter manager which can assign a drive letter for USB and firewire harddisks without affecting other types of storage devices.

Drive encrypted

Some flash drives and external harddrives come with an encryption software. Usually you have the option to split the drive into an unencrypted and an encrypted part. The unencrypted part appears on all computers but the encrypted part becomes visible and/or accessible after you entered a password when the encryption software asks for. But of course this happens only when this software is installed on the computer you attach the drive to.

Daemon Tools V4

There are reports that a more or less failed installation of the Daemon-Tools V4 makes XP fail assigning drive letters to new drives.
It's suggested then to uninstall the tools and to delete some files in System32\Drivers: sptd.sys, secdrv.sys, sptd.sys, sptdNNNN.sys (NNNN = numbers). Here are some more information:
http://www.daemon-tools.cc/dtcc/archive/index.php/t-7868.html
For the deinstallation there is sptdinst_x86.exe.
Recently there are no more reports about this issue, the problem seems to be fixed.

Filter Drivers

Filter drivers are used to manipulate the communication between soft and hardware. They are installed for instance by CD burning software (device class CDROM), by anti virus software (device classes DISK, CDROM and FLOPPY) or by virtualization software as VMware for making USB devices availlable in the virtual machines (device class USB).
Especially after Windows updates some detail may have changed which make a filter driver fail.
The references to the filter drivers are found in the Registry under HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Control\Class\{GUID}. GUID is an 'Global Unique Identifier', something like {4D36E967-E325-11CE-BFC1-08002BE10318}.
The GUIDs mentioned above are:

GUID_DEVCLASS_DISKDRIVE	= {4d36e967-e325-11ce-bfc1-08002be10318}
GUID_DEVCLASS_CDROM	= {4d36e965-e325-11ce-bfc1-08002be10318}
GUID_DEVCLASS_FLOPPYDISK	= {4d36e980-e325-11ce-bfc1-08002be10318}
GUID_DEVCLASS_USB	= {36fc9e60-c465-11cf-8056-444553540000}

On a fresh installed Windows the only filter driver is under GUID_DEVCLASS_DISKDRIVE the value UpperFilters with "PartMgr". No others are there under the GUIDs mentioned above.
Found filter drives can be explored under C:\Windows\System32\drivers to identify the software which has installed it.
A filter driver can be deactivated by renaming the UpperFilters or LowerFilters value. Then restart Windows.

Other 3rd party software

Anti virus, anti spyware, anti anything, personal firewalls, cd/dvd writing software, the Adobe download manager, Symantec NetBackup, usually installs a service and some drivers to get as much control as possible. Sometimes such services and drivers cause very strange effects.
In the U3 FAQ there are some hints for U3 sticks but some may be true for normal flash drives too.
To discover if a problem is caused by 3rd party software first start XP in Safe Mode. If the problem is gone then, boot again normal. Go to Start -> Run, msconfig, Tab 'Services', check 'Hide All Microsoft Services'. Disable them all, reboot and check if the problem is gone again. If yes, then enable them one by one (reboot each time) until the problem is back again. The you have the culprit...
If deactivating services doesn't help, try it with drivers. Start -> Run, devmgmt.msc. View -> Show hidden devices. Open in the device tree 'Non-Plug and Play Drivers'. Here you see lots of items, many from Microsoft and others. You can deactivate a driver by right clicking it an select 'Deactivate'.
If you are not sure about a driver, just enter its name at Google and you will see...

Create a restore point before!

Control Panel
 Administrative Tools
  Local Security Policy
   Local Policies
    Security Options
     Devices: Allowed to format and eject removable media

2.
Windows can write protect USB drives too. Check out the registry under
HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Control\StorageDevicePolicies.
The value 'WriteProtect' should be absent or set to '0'.

3.
Flash memory has a limited lifetime of about 100000 guaranteed write cycles. Most flash cells life much longer but cells that become defective must be replaced by reserve cells (bad block management). The flash controller manages this in the background. When all reserve cells are consumed then the flash controller rejects all write accesses. Then you can read your data and bring the device the recycling.
This can happen even the drive was never even nearly completely filled because the flash controller spreads write accesses over all physical blocks to ensure that all cells are weared out equally (wear levelling).
Unfortunately USB flash drives have no standard mechanism for reading their current health state as known from harddrives. So, always expect an USB flash drive to die at any time...

The list of AutoPlay handlers can be configured by means of this tool:
http://windowsxp.mvps.org/autoplayhandlers.htm or
http://www.winload.de/download/58272/Utilities/Sonstiges/Autoplay.Repair-2.1.0.html

Best deactivate all the AutoRun stuff: USB drive as trojan horse.

The USB controller might getting old and just does not work as perfect as when it was new...

On USB flash drives it's reported that their quarz crystal gets defective. If an USB drive shows the same symthoms on several computers, exchanging the crystal is something to try.

Where to search for drives is stored in the registry. Start the Registry Editor (Run -> Regedit). Check if under HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows\CurrentVersion the value 'DevicePath' points to '%SystemRoot%\inf'. Additional items, separated by semikolons, are ok but '%SystemRoot%\inf' has to be one of them. Screenshot
Then delete the file C:\WINDOWS\inf\infcache.1 - XP will recreate it.
The INF folder and the infcache.1 file are 'hidden'. To see them in the Windows Explorer:
Menu 'Tools' -> 'Folder Options'
Tab 'View', mark 'show hidden files and folders'
If it still doesn't work after a restart, the files in C:\WINDOWS\inf might be corrupt. An Windows repair install helps then.

Another thing to check is if the values 'FactoryPreInstallInProgress' and 'AuditInProgress' are set to '1' under
HKEY_LOCAL_MACHINE\SYSTEM\Setup
and
HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Factory
. They should be 0 or non present.

Next thing to check is the log file C:\Windows\setupapi.log. Failed digital signatures of drivers or other involved files are logged here.
Furthermore XP comes with a tool to verify the signatures of all files. Start -> Run, enter sigverif here.
If you have found the problematic file, check its file version and try to get a replacement with the exact same version from another computer or do a repair installation.

Another possible reason is a corrupt database of the 'Cryptographic Services'. How to fix this is described at Microsoft:
http://support.microsoft.com/kb/822798
The symptoms described there are different, but the cure is right.

Cheap USB extension cables may cause problems too. The thinner and longer the higher the risk for problems. The plugs wear out in time.

USB ports on front of the computer are more problematic because the USB is leaded by a cable thru the computer case which is full of interferences. Furthermore the port a mechanically stressed, so the usually fail sooner or later.

Other attached USB devices may interfere, usually such ones that don't use a default Windows driver and which permanently transfer data, such as web cams.

Cheap USB hubs die slowly. First symptoms are disappearing devices and communication freezes.

If an USB device has been detected as 'unknown device' once it might be necessary to delete it in the device manager and replug it then.

Another try is a complete USB device clearing by Microsoft DEVCON and the RenewUSB.bat from http://www.robvanderwoude.com/devcon.html

A cleanup can be done manually too. Put the following two lines into Notepad and save them as DevManager.CMD:

set DEVMGR_SHOW_NONPRESENT_DEVICES=1
devmgmt.msc

My commandline tool DriveCleanup does it for all currently non present storage volumes and USB drives.

Microsoft has set up a page for General USB troubleshooting in Windows XP

To have DEVMGR_SHOW_NONPRESENT_DEVICES=1 set permanently, download and doubleclick this file: DevMgr_Show_1.reg. After next logon it takes effect.
It also sets DEVMGR_SHOW_DETAILS=1 to get the "Details" tab in the device's properies dialog under XP.

You can check suspicious and new drives by means of the free tool H2TestW 1.4 made by the German computer magazine c't.

If a drive is a fake then you can create a small partition to protect the non existing range from being used.
Windows 2000, XP and higher do not support creating partitions on removable drives. So either turn the drive into an USB harddrive or do it under Linux or by means of the Ranish Partition Manager.
Anyone knows a free tool to create partition on removable drives under Windows XP?

To test if there is any access to the drive, you can use Hex Workshop.
'Disk' -> 'Open Drive...'
Select here the drive by its size. Stop here if you are not sure!
Once opened it shows the content of sector 0 where you find the partition table on harddisks. On removable drive there can be a partition table or a boot sector ('super floppy').
The format tool mentioned above write a partition table. XP creates super floppies on new medias.

To give a disk a complete new start, just overwrite sector 0 with zeros: Select all using the mouse, click '&', OK, save. Now you can go to the disk management console to partition and/or format the drive again.

FAT32 on drives > 32 GB
Under XP and higher Microsoft has blocked formating drives larger than 32 GB with FAT32 without a good reason. But for devices with a standalone function as image tanks or MP3 players FAT32 is essential - they don't work with NTFS formatted drives.
The german computer magazine c't offers a format tool - H2Format. But it works on unformatted partitions only. To prepare a drive, go to the Disk Management, delete the partition, create a new one and select 'Do not format'. Then use H2Format to write a FAT32 file system - usage is similar to the FORMAT.EXE. Sample:
h2format u: It's very fast because it does nothing else then writing an empty FAT32 file system.
Another FAT32 formatting tool is Fat32Formatter. Under Linux there is the tool "MakeDosFileSystem", short MKDOSFS. There is a Windows port:
http://www1.mager.org/mkdosfs

A modern BIOS sees USB drives (at least a single one), so you can deal with them under pure MS-DOS too. Or without any operating system: Get the great Ranish Partition Manager, unzip it, start the PART.EXE under Windows. It detects that it's running under Windows and offers the option 'Copy PART.EXE and update boot sector on A:'. This writes the program to a floppy in drive A: that you can boot from then. It does not contain an operating system but it's bootable.

• Corsair Flash Voyager 8 GB
• Corsair Flash Voyager 16 GB
• Corsair Flash Voyager GT 4 GB (VID_1B1C&PID_1A90)
• Corsair Flash Voyager GT 16 GB
• Corsair Flash Survivor 32GB
• OCZ Rally2 32 GB
• OCZ Rally2 Turbo 8 GB
• OCZ ATV 4GB
• Buffalo Firestixx 1 GB (RUF2-S)
• Buffalo Super High Speed USB Flash Type R 8 GB
• Super Talent Pico-C Chrom 8GB
• Intenso USB Drive 8 GB Slim Line
• Sony Tiny Vault 2GB
• LG USB Drive 2 GB (UB2GVMS01)
• Ativa 325-300 16GB
• PQI Intelligent Drive i820 4 GB (8 GB does not!)
• Powerram mini Pro (16GB)

A filter driver for removing the RMB has been made by Hitachi for their Microdrives (Compatct Flash cards with a mini harddrive):
xpfildrvr1224_320.zip

By modifying the included INF file the filter driver can be used with any other 'removable' drive.
For the device detection there are the lines in section [cfadisk_device]:

[cfadisk_device]
%Microdrive_devdesc% = cfadisk_install,IDE\DiskIBM-DSCM-11000__________________________SC2IC801

"IDE\DiskIBM-DSCM-11000__________________________SC2IC801" is the device ID of one of the supported Microdrives.
In analogy to these lines we add one line for each 'removable' USB drive we want to turn into an USB hard drive. The ID is found in the Windows device management: Expand 'Disk drives', right click your USB drive, select Properties. On the tab "Details" under XP the item "Device instance ID" is already selected. Click on the ID in the List and press Ctrl+C, this copies the ID into the Windows Clipboard and can be pasted somewhere else with Ctrl+V.
XP shows the tab "Details" only when the environment variable DEVMGR_SHOW_DETAILS=1 is set:
DevMgr_Show_1.reg download and doubleclick the file, then relogon to take effect.

Sample:
USBSTOR\DISK&VEN_LEXAR&PROD_JUMPDRIVE&REV_1.30\K326441127040&0
We need the fat part:

[cfadisk_device]
%Microdrive_devdesc% = cfadisk_install,USBSTOR\DISK&VEN_LEXAR&PROD_JUMPDRIVE&REV_1.30

In the last line of the INF file we change "Hitachi Microdrive" into something nice as "RemovableToFixed".

In the device manager again right-click the USB drive, "Update driver...", then "No, not this time" -> Next -> "Install from a list or..." -> Next -> "Don't search." -> Next -> "Have Disk" -> browse to the INF file here. Now "RemovableToFixed" should be in the list -> Next -> Confirm the two warnings -> Finish.
Now the drive is redetected, actually as USB hard drive. The drive can be partitioned, the policy "Optimize for performance" indeed activates a write cache on FAT formatted drives and Windows will create the beloved folder "System Volume Information"...
My tries to automat the installtion by means of Microsoft DEVCON did not succeed.

As far as known devices are shown in the "Safely remove hardware" list if they are marked as removable and not as "surprise removal is ok".
These are bit coded flags:

From cfgmgr32.h:

#define CM_DEVCAP_REMOVABLE         (0x00000004)
#define CM_DEVCAP_SURPRISEREMOVALOK (0x00000080)

If you take away 4 from the value or add 80h and then refresh the safe removal dialog by toggeling the checkbox, then the drive is gone.
But the value is reset when you attach the drive for the next time or on next boot. This is hard coded into the driver and read each time the drive is loaded. If you export the modified value a reg file then you can silently load it on startup like this:
regedit /s hidecardreader.reg
But you need admin previleges to write this value. Under Vista even an admin is not allowed to change the value offhand.

The device instance id string of your drive (this USB\Vid_090c&Pid_1000\A740000000000097 thing) is found in the properties of the drive in the device manager on the 'Details' tab. But XP shows the tab "Details" only when the environment variable DEVMGR_SHOW_DETAILS=1 is set:
DevMgr_Show_1.reg download and doubleclick the file, then relogon to take effect.

On the tab "Details" under XP the item "Device instance ID" is already selected. Click on the ID in the List and press Ctrl+C, this copies the ID into the Windows Clipboard and can be pasted somewhere else with Ctrl+V.

Meanwhile I've added a function to do this to my USB drive letter manager.

Still, you have to determine the device id, but everything else is left to the USBDLM service.

In the USBDLM.INI set for instance for an USB drive

[HideFromSafelyRemoveHardware]
DeviceID1=USB\Vid_090c&Pid_1000

	USB Port is changed	USB device is changed
no serial	detected as new	detected as the same
unique serial	detected as the same	detected as new
all indentical serials	detected as the same	detected as the same

The only way to change the behaviour is to make Windows to ignore the serial. This can be done for all USB devices or for a certain device. See below.

Two identical drives

Two identical drives doesn't work if they have identical USB hardware serial numbers. This is a violation of the USB mass storage specs but such drives exist. As far as I've seen such drives can be used alone only.
Some say that the sentence 'If provided, the serial number must be unique to each USB Vendor ID and Product ID pair.' can be interpreted as allowing the same devices from the same manufacturer to have the same serial number, albeit unique to that product line from that manufacturer, but I think the term 'serial number' alone makes absolutely clear how to read that.
You get what you pay for. Giving each device a unique serial costs some cents, while omitting the serial make the users complain about the device being detected as new one when it's attached to a different USB port...
Update: I've tested two USB single slot card readers with identical USB serials: XP-SP2 fully patched and Vista where able to handle this at least on first view. They handle the second drive similar to drives without a serial. But I've also seen an XP which generates a blue screen when the second device is attached...
You can check the USB serial by means of my commandline tool ListUsbDrives.
Windows 2000 and higher can be forced to ignore all USB serials or the serial of devices specified by vendor and product ID:
Under
[HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Control\UsbFlags]
there is the value GlobalDisableSerNumGen:
0 disable all USB serials
1 enables USB serials
On first view the name seems to implicate the opposite. Probably DisableSerNumGen stands for Disable Serial Number Generation, so when 'Generation' is disabled then the real serials are used.

The better solution is an individual setting for the device in question.
Create an entry under the above key. The name starts with "IgnoreHWSerNum" followed by the vendor and product ID of the device. The value for ignoring the serial is 1 as the name implies.
Example for vendor=1111 and product=9999:
IgnoreHWSerNum11119999=1
The value should be a binary and have exactly 1 byte. You can get the IDs by means of my ListUsbDrives started with parameter -a (all drives and informations):
You find them in a line like this
Ctrl ID = USB\VID_1111&PID_9999\USB_serial_number

No restart required to take effect.

Ignoring the serial can be used to prevent the plug and play is triggered when an USB device is exchanged by another expempar of the same model. This is great for instance when an USB printer is defective and replaced. When the serial is ignored (or not present) the new printer just works as long as it's connected to the same USB port.