You should do a few tests to systematically isolate the problem.
If I'm understanding you correctly, you can connect the KT to the computer with the supplied microUSB cable, it appears correctly as a removable drive, and you can see the content on that drive when you check in Windows?
Before you involve the Kobo desktop software, try these tests:
Test#1: Can you copy a file from the KT root directory to your computer?
Test#2: Can you copy a file from your computer to the KT root directory and then copy it back with no corruption (a small pdf or epub file will do, won't do any harm on the KT).
Test#3: When you safely disconnect the KT (eject or disconnect the drive in Windows) and unplug the USB cable, does the KT say on the screen that it's processing new content? And does the new file appear in the title list a minute later?
If these tests are passed, everything would appear to be working between the computer and the KT, and your problem is probably with the desktop software or your procedure. If not, you should try connecting to a different USB port (don't go through a hub), try a different microUSB cable if you have one, and try connecting to a different computer if possible. Any one of those tests might isolate the problem to one part of the connection chain. If none of these things help, then probably the KT is defective.
Assuming the above tests work, then you can try starting the Kobo desktop software. Apparently from what you wrote it detects the KT and starts to set it up? Make sure you leave it long enough to complete. It's probably trying to download a firmware update. If it has trouble communicating with the Kobo servers, it might take a long time, or it it might get stuck. In that case you should try again at a different time. It downloads the new firmware file to the KT memory first, and nothing actually happens until you disconnect it. Then you should see the firmware update start on the KT screen.
Last edited by FJames; 06-26-2012 at 10:50 AM.