I submitted a ticket to Kobo support a few days ago and their said my issue was being escalated but I haven't heard back yet.
I decided to start mucking around with things today and I think I found the solution.
Disconnect your iPod from your computer before launching the Kobo Desktop App.
I "Safely Removed" my iPod which was connected via USB the entire time I was having this problem and bingo my Kobo Desktop App works fine now and can connect to my Kobo.
If I re-connect my iPod and re-launch the desktop app it crashes.
Previous to 1.7.1 I could have my iPod connected to my PC and use the Kobo Desktop Software.
If you don't have an iPod try removing any USB devices you have attached one at a time. Please exclude your keyboard and mouse from your testing
