I would say that you definately have a driver conflict of some type. To sum up: you can use the drive when you first start up, but lose it after you run for a while. This is very odd.
The last thing to try would be an external USB hub as someone had suggested. If that works and it uses the drivers properly, then possibly your USB drive will work.
Gremlins like this are hard to resolve!
As far as SP1 goes, that's all that I use and I have several USB drives that work just fine. You might try running the SP1 update again to see if that helps.