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Cursor won't stop flashing after connecting external drive

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I hope I can explain this clearly. Here goes:
I have a Toshiba laptop with Windows XP with all the latest drivers and patches. I have an external firewire hdd for it that I've had for quite some time. I recently reformatted due to getting a new internal hdd. When I hooked up the external drive, everything went normal except for one thing: the cursor always flashes between normal and busy! Before, it would only flash when I connected the drive and Windows would scan it. Now, always!
I have found one quick-fix, and that is to force close an occurence of svchost.exe, but doing so makes me lose audio in games and applications.
I have tried everything I can think of.. disabling the drive, uninstalling it, turning it on after closing svchost.. nothing makes it stop. The cursor continues to flash even if the drive isnt connected. I even went so far as to reinstall Windows, but after I connected the drive again, the cursor still flashes!

Is there anything I can do to remedy my situation? I have a feeling I'm just going to have to close svchost everytime I start up and don't want a blinking cursor, then restart again if I want sound..
 
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