King Bapho,
What makes you think you can solve a problem that has plagued so many people with three words? I guess my post wasn't clear. This is a controlled experiment with pretty obvious results...
I have two machines, one is a toshiba satellite with XP home, one is a Dell Optiplex with XP Pro. Neither one has photoshop elements. The system that works doesn't have itunes installed either. Many of the people who are unable to download pictures from their iphone to their computer also have toshiba satellites, so I checked if doing the same thing with the same software would work on a different machine. That is called control. If every element in a system is identical but one thing, and the result is different, you know the cause and effect relationship.
In this case the one thing that is different is the machine.
(One thing I was not able to control for here is XP Home vs. XP Pro. That could have something to do with the cause of this problem, but I think it is very unlikely as all the interaction up until the failure or success in downloading is identical.)
All of what I have observed is consistent with a noisy or otherwise defective USB. There are so many other problems with this machine it doesn't surprise me. (Next home computer is going to be a mac.)
I have not tried paying $60 for elements because unless it somehow has a better usb error correction scheme (which seems unlikely) it shouldn't solve any problems. I would be willing to do the experiment if anyone wants to send me a copy, and I would like to know if anyone has had failures using microsoft camera and scanner wizard that were solved with photoshop elements. I have several years experience debugging hardware problems and I know what I am doing, but I have been wrong before and I don't have access to a scope or a logic analyzer anymore.
Another thing I would like to try is plugging a usb to pcmcia converter into my pcmcia slot and seeing if that works. I'll post here if I try that, but for now I have a working solution.
It is my laptop, USB is the means of transportation.