Gents...we have victory! After much perserverance over the weekend a utility called "System Information for Windows" ...see
http://www.gtopala.com/ ...enabled me to generate a report from which I zeroed in on a file called USBSTOR.SYS in location c:\windows\system32\drivers and took note of the file date & version which was 11/3/2011 6.1.760.17577. I checked on 3 other different PC's with W7 OS and all were 14/7/2009 6.1.7600.16385.
Well, I copied over the older version after renaming file on the PC with the 'troubled driver' ...rebooted...and Voila! ...the USB storage devices were correctly being recognised.
Appreciate the two/three heads are better than one. A global solution resolved by Denmark, America & New Zealand...this time it was New Zealand that got the ball across the line...GO THE ALL BLACKS for this RUGBY WORLD CUP.
Not sure how to sign off as SOLVED.