I have basically the same computer as you listed except it is running service pack 2.

I was under the impression that the USB ports were the newer USB 2's ?  

I also had a San Disk 512 MB mini cruzer that quit working at just under a year old. It had worked fine since new just one day it would not be recognized in any of my computers where it had always worked before. I sent an email to San Disk to complain about it and they wanted me to return it to them for an exchange. Unfortunately it had some personal info on it when it quit working and I emailed them back that there was no way I was willing to send it back where someone with more expertise than I have might decide to snoop through it's contents. They pretty much said they could not help unless it was returned so I declined their offer and said I will eat the cost of a replacement in exchange for making sure the info on it was not available to a stranger. To date I have not replaced it. I also have a 256 MB mini Cruzer that ,so far, continues to work properly and was about the same age as the 512 MB one  I'm waiting to see if any problems with it develop before I decide to buy any more San Disk flash drives.  

Perhaps they had a batch of these that were not right ?

Good luck on getting a replacement but guard your private info if it is on the drive.