OK, guys. This is getting really intriguing and interesting. I just took my PC laptop from work, it runs on WindowsXP with latest SP and patches.
When I plug my K200D to the laptop through the USB, the laptop sees the device, set it as a "Mass storage device" and allocates it as drive E which is fine. Now the funny part is:
1. The top LCD of the K200D doesn't show "PC" sign which it should when connected with a PC. It simply shows the typical information such as shutter speed, ISO, etc....
2. Now on the laptop, I open the Windows Explorer, it sees the Drive E but when I click on it, Windows pops up "Please insert a disk into Drive E"

I'm baffled!
This tells me that the USB port on K200D is probably working but the software on the K200D is probably not.
I'll keep playing and report back any progress.