I have the similar symptoms.

Running XP Pro on a Dell Inspiron 9100 w/ATI 9700 with 64mb RAM, 512mb system RAM. Using the G3 controller through USB.

If I have an external mouse plugged in to a different USB port and I run AFPD and then I move the external mouse, WHAM!, my entire system locks up and I cannot recover from it. I am forced to do a hard boot to clear things out. I have tried the windows key and CTRL-ALT-DEL to get me to the Task Manager, trying to kill the process, but I can't even do that.

I have found that if I unplug the external mouse, then it works fine. This is obviously a USB problem. Any ideas on what causes this?

STLPilot, any ideas?