Dont worry I know what it is you are talking about.... I am also experiencing that same exact problem. Original Windows XP will auto install most USB Pen Drives... Yes it shows the popup at the bottom thats its installing but it never brings up a Found New Hardware Wizard to select the drivers. The modified Nlite XP CD now after i guess some particular file is removed Windows XP no longer auto installs the USB Pen drive but instead now Prompts you with a Found New Hardware wizard so you can manually choose the USB Mass Storage Device... So as you can see even if you disable balloon popups it makes no difference, you will still get the Found New Hardware prompt. So i guess what i will have to do since no seems to know the answer or even bothers to try to figure it out, I will do several Nlite Modification test to figure out what really causes this issue... then I will return with my findings