Hmm, so maybe this is why my iPod works on my laptop which has XP SP1 Installed, but fails to be detected by my PC which got XP SP2. I have already tried the workarounds noted by these two Knowledge Base articles even before I read these, but it simply failed to work. I don't know if there has been any reports of iPods failing to work on XP SP2 systems, but I would suggest that if you are trying to use iPods on XP, try it first on the store with both SP1 and SP2 before you buy if at all possible.
Oh and mine is an iPod Photo 30GB one. It might be that my iPod is defective too.