Windows XP not detecting storage devices

Have you tried going into Safe Mode to A) see if it works properly there and B) using System Restore to revert back to some point before the last time it worked properly?

Try an alternative scan, like the Trusted on-line scan 'Housecall', from Trend Micro - http://housecall.trendmicro.com

Run Malwarebytes - that often finds things that some AVs ignore.

As you can't see USB devices either, I suspect that some drivers are missing or corrupt.

Have you tried a System Restore?

If Jimmy's suggestion doesn't work, you may need to rejuvenate the HDD surface with something like Spinrite (boots from CD or Floppy drive).

Would love to know what the problem was if you succeed.

How can you run an antivirus program from the c:-drive if Windows doesn't recognise the c:-drive? In fact, how can you boot and run Windows if it doesn't see the drive it's located on?

Kees