I had the same problem and was ready to throw the the player out the window, I had even just sent a nasty email to Sony when I managed to fix it.
Make sure you are running WMP 11 is the first thing.
Second thing is download the .Net framework 2.0 either using the Sony web site or direct from Microsoft.
Third is download the Music manager from the Sony web site.
All three are part of the same install I believe which can be found here
If not go to microsoft for WMP 11
and .Net framework 2.0
Make sure your Virus checker is off as well as the Firewall other wise the .Net framework will no install.
Once Complete reset PC and once run up turn on the virus checker and firewall and then connect the MP3 player and all should be now working.
If you have had a failed install previously and you have the device in the device manager, right click my computer, select device manager and the scroll down until you see the walkman with the exclamation mark next to it. Then you will need to delete this first and then reconnect the device. This time it should install correctly.