Shuffle Blinking Orange/Not Being Recognized-- Please Help!

I just got a new iPod Shuffle 2nd generation.
I plugged everything in as stated in the instructions.
The only thing that happens is a folder "IPOD(E:)" pops up. It's empty.
Meanwhile, the shuffle is blinking orange.
So I open iTunes. ITunes tells me that this new ipod only works with ITunes 7.02.
Problem: But I DO have 7.02 running. That IS my current version of iTunes. So this pod SHOULD be working.
I'm not getting any "error" messages. Just an empty "IPOD(E:)" folder and the update message. There is no eject button for the shuffle because iTunes does not recognize any iPod as having been connected.
I have a 1st generation Nano that works fine also on this system. I have a Windows XP.
Help, please!

awg2009,
The iPod Shuffle (Second Generation) showing up as the E: drive, and iTunes reporting that you need iTunes 7.0.2 mean that iTunes 7.0.2 is not fully installed.
In iTunes, go to the Help menu, and then About iTunes, what is the version number in the first line of scrolling text?
If it still reports 7.0.1, close iTunes.
Go to www.apple.com/itunes/ and download iTunes 7.0.2.
When prompted to save or run the file, be sure to save the iTunesSetup.exe where you can find it later.
After it has downloaded, trun off your anti-virus software which may prevent the iTunes files that may be running in the background from being changed, and run the iTunesSetup.exe.
Restart the computer after installing.
Then connect the iPod Shuffle (Second Generation).
If that does not resolve the issue this article contains more information on troubleshooting iTunes install errors:
http://docs.info.apple.com/article.html?artnum=93976

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