From memory some look at LETTER ASSIGNMENT SOFTWARE to help out.
http://support.microsoft.com/?kbid=307844 is good to know but do try setting the letters rather than letting XP assign them. And skip a few letters (10?) so what gets plugged in has an open letter to use.
The old letter still shows in the safely remove list is an enduring bug. I have heard no news of this and the other bugs being fixed. It's not a fatal bug so they will likely leave it as is.
I have been running into problems with my Windows XP-SP3 system. The drive letters assigned to my various USB devices is really inconsistent.
I'll set up unique drive letters through MY COMPUTER-MANAGER/Disk Management. Sometimes the drive's letter remains correct; sometimes it doesn't. It will fall back to the first available drive letter when the drive is inserted.
Also, I use SAFELY REMOVE HARDWARE to remove a Flash drive or other external USB drive, but the drive and its letter sometimes continues to show as open in DEVICES WITH REMOVABLE STORAGE.
Any help correcting these issues would be welcome.