I bought a 256MB USB flash Drive. I have inserted it into two computers running Windows XP - one desktop, one laptop - and niether recognised it. It has a light on it that lit up so it is getting power. Another flashdrvie I borrowed to see what would happen worked on the laptop but not on the Desktop.
I had the same problem, but after I had filled it up with data. I put it in the port and the drive would not come up. I checked Device Manager and It was in there, in fact everything told me that it was there and working properly, but it was not showing up in My Computer, so therefore I could not access it.
I did eventualy manage to reformat it and all was well. I can't remember how I get to the format option but I played around with it for some time and just ended up there.
Once formatted all was well. I have learned from this experience not to trust the Flash drive (pen drive)with any important data. Even today I am going to my sisters place to pass on some data to her and I am taking a backup with me.
I have a similar problem. My VTec 128Mb flash drive works perfectly on every machine running either Windows 98se or Windows XP SP1, that I've tried it on. However, on my own machine, running Windows XP SP2 it has stopped being recognised. I can't be sure that it stopped immediately after the SP2 upgrade, but it has certainly stopped since. I'm reluctant to regrade to SP1 without more surety.
I had a similar problem, which took me nearly a year to find the solution to. I have a Soundblaster Live soundcard, which installs, by default, a control panel applet called Disc Detector. This for some reason did not allow the USB Flash Drive to be detected, after I disabled Disc Detector everything was fine. If you have a SB card and Disc Detector try disabling it.