Hey, registered because I had this problem. This thread one of the only real thing I could find in the google search that actually offered solutions.

I was having an issue with a Logitech USB cordless mouse, It wouldn't install, the hardware wizard was running and wouldn't let me manually install the drivers because it was 'using them'.

I tried the registry solutions in this thread, non of them worked (didn't have those entries). Even did an XP re-install no dice.

So anyway, to fix my problem I used Revo Uninstaller to uninstall Set-point, and everything else it installs with it.

I then went into task manager and noticed update.exe running, I closed this, and all of a sudden the hardware wizard told me the driver installed had failed. But, this ended it's process, meaning I could just add-hardware again.

Worked.

So if you happen to be having this issue with a cordless mouse, hope that helps.