I had this problem but it only started when I upgraded to Vista Device Center 6.1. My Touch was working fine on 6.0. One day I noticed there was a new version. After installing, my device was no longer recognized by the system.
Long story short, I Googled for the old 6.0, installed it and was back up and running. Couple of months later I accidentally installed 6.1 again (via Windows Update) and it broke again...
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