Connecting shuffle disconnects keyboard and mouse

Whenever I connect my wife's shuffle to the computer my keyboard and mouse immediately stop working. This is a new problem, it worked fine for about a month before this behavior started.

I have tried rolling back xp to a prior save point and that did not correct the problem.

I have reset the shuffle to factory settings and this did not correct the problem.

Anybody know what can be done to fix this problem? Or have some suggestions how to begin troubleshooting?