Very glad we could get this interesting case solved! This turned out to be a problem unrelated to the product, with XP’s cryptsvc service and its database. For the benefit of others, the main clue was this error message:
#W239 The driver signing class list “C:\WINDOWS\INF\certclas.inf” was missing or invalid. Error 1168: Element not found. Assuming all device classes are subject to driver signing policy.
#E358 An unsigned or incorrectly signed file “c:\windows\inf\usb.inf” for driver “Generic USB Hub” blocked (server install). Error 1168: Element not found.
And that error led to guessing this machine had corruption of XP’s %Systemroot%\System32\Catroot and catroot2 databases (which apparently is not uncommon).
This has a whole bunch of effects, some of which are listed in Microsoft’s knowledge base article. Fortunately, Microsoft has a “fix it” utility which makes cleaning this up easy, listed in the resolution section
Hope this helps someone else who might hit the same error (could happen on any hardware).