Okay, I'm tired of crawling through google results that don't help, so maybe one of our electrical or computer engineers an help me trace the root of the problem:
I have a little P.O.S. flash drive that was given to me when they were still fairly new to the process of mass production. It worked for a week, then the seal on the case broke and it hasn't worked right since. The seal only served to keep the circuit board protected, not air tight.
So, I plug in the drive and it seems to load up fine. The second I try to modify the data on it, the LED starts up (as expected) and the computer suddenly loses communication for a moment. This is just enough to end any process being run on it. If I just let it sit there, it's connected without issue. I tried to reformat it, but it lost connection before it could finish. This happens in quick format and non-quick.
This problem has occured on EVERY computer I have plugged the drive into. Windows 98SE, XP, and Vista. I have yet to try it on 7, but I'm convinced the results will be the same.
There is no visible damage to the USB port or the circuit board.