Your Windows XP PC may not recognize the removable storage devices that you connect to your PC. However, the other USB devices may work normal.
This is not an issue and a security feature added in Service Pack 2. When you connect any removable media device to a computer that has Microsoft Windows XP SP 2 installed, and the solution provided in the following MS Kbase article may not resolve the issue:
Now, a new feature has been added to Windows XP SP 2, which will prevent the write operations to USB block storage devices, such as memory sticks. When this option is enabled, the devices function only as read-only devices. To enable this option, modify the following registry entry:
Double-click "StorageDevicePolicies" and change the DWord value to 1.
0 - Disabled
1 - Enabled