Try the Reset, button -- it won't wipe your memory (there's a very specific, multi-step method for the hard reset, which does wipe the memory, but it's not something you can do by accident, so don't worry 'bout that). You do have to exercise the power switch after the paper-clipping the reset button, and it takes a couple of minutes to run through it's routine, just so you're expecting it.
The "do not unplug while xferring" message is normal whenever the Reader is connected and the Connect software is running -- one of it's sub-optimal 'features' -- but I'm not sure what's going on with yours, hopefully a soft reset will knock it out. (knock on wood)
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