If your PC is on a domain (typically a work network) the
administrators may have following this MS virus alert KB
http://support.microsoft.com/kb/962007 which stops WMDC dead and
windows mobile phones do not install when connected with USB. There
are many discussions about this problem around, but non seem to have
this solution)
The trick to fix this is, open Regedit.
Right click and select properties on HKLM\SOFTWARE\Microsoft\Windows NT
\CurrentVersion
Select Owner: TrustedInstaller. Change TrustedInstaller permissions:
Full Control & Read, not inherited
Next right click and select properties on HKLM\SOFTWARE\Microsoft
\Windows NT\CurrentVersion\SvcHost
Select Owner: System
Change TrustedInstaller permissions: Full Control & Read, inherited
from CurrentVersion
(Actually in the end I changed all permissions in these 2 to Full
Control & Read)
Save your work and reboot
Now connect your windows mobile phone via USB and with any luck WMDC
will download (even if it installed) and the phone will connect.
Good Luck