Quote:
Operating System: Windows XP Professional (5.1, Build 2600) Service Pack 1 (2600.xpsp2_gdr.040517-1325)
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My mistake - Windows can't even correctly identify its own version

If you look closely, you'll see the term "Service Pack 1" AND the term "xpsp2" so I guess you can assume that the larger one is probably correct.
Bios upgrades, by the way, should not be considered 'unnecessary'... most mainboards are made in Taiwan (maybe some in Korea), and have REALLY crappy quality. You're actually lucky your capacitors haven't blown up yet, after 3 years. Regardless, the bios that ships with the board often does not offer complete functionality, and is full of bugs. The only software that directly deals with your USB functionality are the motherboard bios (comes from MB manufacturer - they will have detailed instructions on the website, poorly translated from Chinese, but legible), the chipset drivers (come from the chipset mfgr, almost certainly nVidia or Via, and they are much easier to install with much better instructions), and Windows.
It's possible you have bad USB ports, a defective motherboard, or a defective drive. Or Starforce / some other virus is messing up your hardware. But it's just as likely that the bios is the problem, and if you want to use a USB drive, you'll have to update it.
Bios flashes aren't really dangerous - you're more likely to damage your computer by vaccuming near it or knocking a speaker onto it. I've encountered both of those but never heard of a bios-flash that caused unrecoverable problems.