On my laptop and work computers (both run Win 2000 Professional) I've had some issues with detecting the CJB3 via USB. Seems like it has to be turned on, USB plugged into CJB3 first, then plugged into computer...and sometimes it requires doing that a few times. No reason for this that I can think of, that's just the way I got it to work so it's what I do each time. This is just using the software from the Website and I'm not sure what firmware or OS versions I was using as I never updated them.
My home PC used to have Windows ME then I got XP and I connect by Firewire and have never had any problems connecting. I had Notmad with ME, but lost it (and the sale number to get it again) when my hard drive crapped out and I installed XP and never had any problems with it. Never tried USB from home so maybe I'd have similar issues if I tried it that way. You can get a 4 port Firewire PCI card from Best Buy for like $20 (probably half that online) and it's MUCH faster than USB...I highly recommend that for transfering 1GB+ files that will take FOREVER via USB.
I have a Crative Zen Touch for at work and in my car and it gets detected by everything right away. I kinda think that the driver for it might interfear with the CJB3 driver (which goes in a CJB2 folder on my computer which I always thought was weird).
You might want to go to Control Panel > Add or Remove Software and remove all the CJB3 related stuff, reboot, and then start from scratch. Part of the problem might be your REG accessing the log file making it impossible to delete...that requires going into regedit and messing around, but I don't know how to do that stuff and have messed up my computer before trying so I'm not giving any advise on that