Only usb 1.1 devices work, not 2.0

I am trying to fix a computer which is experiencing issues with USB. Power-needy devices such as any removable storage (flash drives, external HDDs etc will not work, it says device not recognized, and pops up in device manager as an unknown device). However, simple non powered items such as Mice and Keyboards work without an issue at all.

Tried turning off power option to let pc turn off ports on all hubs, checked USBSTOR in hkeylocalmachine to make sure it was set to 3, and it is.

The PC had viruses, particularly an ugly infection by Security Tool, a fake anti-malware app that is itself actually malware. I removed the viruses and ran 3 different AV programs and cannot detect a trace of anything harmful, cleaned registry and ran anti spyware software.

Is this a hardware issue or some other software issue i am over looking?
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  1. Oh, by the way the machine is a Dell custom desktop with WIndows XP SP3.

    I forgot to note that i also booted into BIOS and double checked all USB options are what they should be and all ports are enabled.

    This is driving me crazy!
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