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This is the number one reason for failure. Most modern USB drives (over 32GB) come pre-formatted with . Windows XP does not support exFAT natively. Without an exFAT driver, Windows XP sees the hardware (thanks to Usbstor.sys) but cannot mount the file system. The drive appears in Disk Management as "Unknown" or "Raw."
However, Windows XP was released in 2001. The USB 2.0 standard was not finalized until later, and the ubiquitous USB flash drive as we know it today was barely in its infancy. Consequently, the original "Gold" (RTM) release of Windows XP had very limited support for these devices. windows xp usb mass storage device driver