The conflict between USB drives and mapped drives seems to have been resolved with XP’s Service Pack 3. Previously, Windows would only assign USB drives to letters D-H. If these letters were already assigned to Mapped Network Drives the USB drive would not show up until a different drive letter was automatically assigned to it. Using a third-party software was the previous solution and still useful for other versions of Windows.
This would require a tool like the USB Drive Letter Manager (previously written about here) to resolve the problem. But now after SP3, the USB drives are being assigned up to letter M and beyond.
The hotfix and causing problem is described in detail here: