OK, I finally found a solution for my iPod and it took several days for me to find it.
What had happened was that my iPod was showing up as my c: drive (since I have a RAID array at g: as my boot disk) and iTunes will not recognize anything at c:. Once I changed the drive letter then everything worked.
I think that my problem started when my computer started searching the iPod as a drive when using the Search feature under the Start menu.
Here's where I found some good tips from someone on the Apple iPod board:
On the USB issues that other have been experiencing, I've seen USB devices (not just iPods) act weird on different machines. Sometimes all it takes is using a powered USB hub and sometimes it's as simple as changing ports to get something to work. For example - my iPod connects fine with USB 1.1 on my work laptop (and I have a powered hub - don't know if that's a coincidence...)