I have this issue with a Dell Optiplex 380 running Windows7 SP1. BIOS updated to A07. Latest Dell drivers installed, Intel chipset update utility run.
USB1 devices work fine in all ports (mouse, keyboard, webcam, unpowered hub), USB2 devices (memory sticks, external HD) give a 'USB Device not recognized' message and install as Unknown devices.
If after plugging in a USB stick I go into Device Manager, go to View > Devices by Connection and open the tree down to Intel(R) N10/ICH7 Family USB2 Enhanced Host Controller - 27CC > USB Hub > Unknown device, then uninstall the USB Hub, I immediately get a popup saying 'This device can perform faster if connected to a USB2 port'. I can then access the stick contents normally. I can also use any other USB stick or HD in any other USB port
This only works until the computer is shut down, on a restart Windows detects USB Root Hubs and installs Device Drivers, and I'm back to the USB Device not recognised scenario again, when plugging in a USB stick.
Disabling the USB2 Enhanced Host Controller results in USB memory sticks and HDs working - except that I get the 'This device can perform faster...' popup.
Suggestions on how to fix this would be very welcome!
Currently the problem that you are experiencing seems to be an operating system corruption. Windows* 7 uses generic USB drivers to operate and in your case as you have an OEM system, the operating system could be customized for your configuration.
Currently I suggest to reinstall the operating system using the recovery disk or partition that your system manufacturer provided.
Thanks for the reply Victor_Intel. I used the Dell OS re-installation DVD and and installed the appropriate drivers for this specific system from the Dell website. The Intel identification and update utility reports that the chipset drivers are up to date, digging a bit further seems to indicate that the chipset driver installation file from Intel is the same as that obtained from Dell.