I had a similar problem shortly after getting my PRS-300. What eventually worked for me was uninstalling and reinstalling all three Sony programs related to the reader.
Do this without the reader plugged into your computer:
Go to Control Panel > Programs and Features (if on Vista or Windows 7). Uninstall the following 3 programs:
PRS-500 USB driver
Reader Library by Sony
Windows Driver Package - Sony Corporation (PRSUSB) USB
See attached screenshot of what it looked like on my computer just before I uninstalled.
Once everything is removed, plug in your reader and everything will reinstall.
Good luck.
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