Multiple Services are required with the new iTunes 7...
I found this in a different thread for a different problem, but it solved my unrecognized iPod in itunes 7.01 with WinXP.
http://discussions.apple.com/thread.jspa?threadID=698551&tstart=0
Quote:
Try this. I found this in another forum and it worked great for me.
1. Make sure that you have these services running
[control-panel->Admin. Tools ->services]
-Network DDE DSDM
-Network DDE
-ClipBook
-Routing and Remote Access
-Terminal Services
-Server
2. stop the iPodService [same location as (1)]
3. Connect your Ipod 5th gen
4. Start iTunes7.0 [automatically starts
iPodService]if not, start it manually in services.
5. Update the new s/w in iPod.
this should not take more than 3 mins. after that, it
will restart ur ipod. ur ipod s/w is updated as seen
in itunes7.0.