Thank you all for your assitance, very patient and helpful all of you and it's much appreciated.
Crent, sorry for hijacking your thread. Good luck!
I may change out USB to new. Haven't decided yet if it's worth the hassle since I'm in the market for new PC anyways.
This was developers reply:
For the 300th time, calibre uses standard operating system calls to read and write files on the Kobo. If you are having problems with the Kobo then the problem is in some combination of three places:
1) The Kobo (and this is by far the most likely)
2) The USB connectors (ports or cables)
3) Your computer's motherboard/USB drivers
And no doubt you will say that everything else works fine but calibre doesn't, so the problem must be in calibre. It's like saying your car works fine as long as you drive it below 35 MPH and the moment you take it over that speed the engine starts belching smoke. The Kobo Touch in combination with some hardware is simply not capable of handling the load calibre puts on it. That is not a bug in calibre.
If I were you I'd return my Kobo and get a decent non-Kobo reader that doesn't malfunction at the drop of a hat.