I would first suggest to compare in Device Manager the USB driver on both versions of Windows 7, the "bad" and the "clean".
If they are not the same, this can explain the difference.
Secondly, I would suggest booting the "bad" version in Safe mode. If the problem now disappears, then the cause is some installed product. Use Autoruns to turn off stuff in bunches and rebooting until you find the guilty product.
As you have said that Device Manager hangs forever, your computer really seems to be in a bad shape.
The only solution to avoid complete re-installation may be to refresh Windows by doing Startup Repair in Windows 7. This will only refresh Windows and leave alone all installed applications and their settings. You will need a Windows boot DVD of the same service-pack level as your installed system.
If your Windows installation is too messed-up so that Startup Repair fails, you will need to reinstall Windows from scratch, recommended with a reformat of the hard disk. So ensure you have backups of all your data, and installation media for all your products including serials. On some computers you receive a boot CD that allows you to restore the system to its state as when bought.