Amazingly enough, the same thing just happened to me for the first time... and it's very perplexing.

I've been flashing N800s on this Windows XP laptop since preproduction days, and never ran into this sort of thing, but now the laptop refuses to recognize the N800 when it's in Update Mode. I can browse the installed SD cards just fine... but Windows claims it can no longer find drivers if the N800 is connected via USB in Update Mode!

What a crock. Even reinstalling the Internet Tablet Software Update Wizard didn't help. And using this same tablet, other PCs I've tested work fine-- so the problem is definitely confined to my laptop. And yeah, Device Manager says it doesn't recognize the tablet BUT updating drivers does nothing-- Windows says it has none. !!!

Interestingly enough, the Video Controller is allegedly suffering the same thing, but video works fine. Arg!