Have you tried any different flash drives on the computers you are having an issue with? It could be a USB driver corruption on both the Windows 7 and XP machine.

Let me know.

I found this on experts exchange, this may be worth a shot:

Step 1: Remove Hidden Devices

1. Click Start. Click Run. Type cmd and press OK.
2. Type "set DEVMGR_SHOW_DETAILS=1" (without quotation marks) and press Enter.
3. Type "set DEVMGR_SHOW_NONPRESENT_DEVICES=1" (without quotation marks) and Press Enter.
4. Type "start devmgmt.msc" (without quotation marks) and click press Enter.
5. Click View. Click Show hidden devices. 
6. Click "+" to expand Imaging devices, Unknown devices and USB devices. 
7. Are there any digital camera devices and unknown devices (including grayed out devices)? If so, please right click it and click Uninstall.

Step 2: Remove all oem*.inf files

=========================

1. Click start and click run then under the run line type in the command "cmd" (without the quotation marks)

2. In the command line, type in the following (without the quotes) and press enter after each command:

"cd \windows\inf"
"ren infcache.1 *.old"
"ren oem*.inf *.old"
"del C:\windows\setupapi.log"
"exit"

Step 3: Removing all entries under HKEY_LOCAL_MACHINE/Enum/USB that start with VID

================================================== ================

Removing the VID entries from the registry will cause them to be redetected at restart.

CAUTION: If you have a USB keyboard or mouse, do not remove the VID entry for these devices, otherwise, Windows may not restart correctly.

1. Click Start and click Run. Type regedit and click OK. The Registry Editor window will open. 

2. Go to HKEY_LOCAL_MACHINE\System\CurrentControlSet\Enum\U SB. 

3. Highlight and delete all the VID_…. entries.

Permissions may be set allowing the deletion of the VID_ entries by following the steps below: 

a) Right-click the key to be deleted, and then click Permissions. The VID_… Permissions window will open. 
b) With Everyone highlighted in the Group or User name section, select Full Control in the Permissions section. 
c) Click Apply, and then click OK. 

4. Turn off the computer.

Step 4: Reconnect the USB Drive to the computer system:

=============================

1. With the computer system turned off, reconnect the USB Drive to the USB port. 
2. Restart the computer. 
4. A New Hardware Detected window should open and reload the drivers.

It's not looking good for the hardware side of it. Since you have tried installing the flash drive on other systems with the same problem, it's likely as you suggested, hardware failure. 

Unfortunately most file recovery software packages still rely on the unit still having power. You may need to locate a data recovery service that can physically extract the hardware from the machine by rebuilding the flash unit with an identical one.

Those types of recovery are extremely expensive (around $500+).

Your best bet is to google various services that can do this for you. I wish I had better news. In the future I'd suggest getting a subscription to Carbonite backup services for retaining off-site backups for all of the files stored on the computer.