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When I updated to 1.7, my Classic Nook didn't want to recognize the SD card either (mine is a Sandisk, 8 GB). I tried rebooting several times with limited results -- the Nook would show some of the books on the card, but not all of them. My problem turned out to be a corrupted file, and once I found it and deleted it, the Nook recognizes the card and all of the files on it just fine. I have around 1500 books on my SD card, by the way.
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