Sounds like the reader's driver for Windows got corrupted or deleted. If that happens I think Windows will view the reader as a USB drive. I've had this happen after a Windows update though rarely, and I also had it happen after I updated the reader firmware. I might also happen if you unplug the reader rather than dismounting it first.

With the reader plugged into the PC, open Device Manager, look for the reader (though it probably won't be listed as a Sony Reader, then delete the driver. Unplug the reader then plug it back in and see if it re-installs the driver correctly.

You can also try unplugging the reader, restarting the PC, then plugging in the reader and see if it re-installs the driver correctly.