Hmmm... that's strange!
I'm not sure if you've tried this, but make sure that the USB cable is connected to the PC before connecting to the 1k. This usually doesnt matter on other USB devices, but for the MPC it makes a difference. You may or may not know that, but I gotta make sure anyway.
I've connected my MPC in this order since version 1.07 and I've never had a problem with Windows XP.
With OS 3.0, I keep the USB cable connected at all times. When I power up the 1k, I'll hear that sound that Windows XP makes when it recognises a USB device. But it won't actually see the drive until I press MODE, PAD 2 (LOAD), F4 (USB), and finally F6 (MOUNT). After a few seconds, the 1k's hard drive contents will pop up in a window and I can fully access it.
The MOUNT function is new to 3.0. Earlier 1k OS's didnt have that option, since you had to insert the USB cable into the unit, and then when finished transferring files, you'd have to click on the "Safely Remove Hardware" icon in Windows sys-tray (on the taskbar).
As far as viruses are concerned, I wouldnt doubt that a virus can be transferred from your computer's hard drive to your 1k's hard drive... but in 8 years of fuking around with PC's, I've never seen a virus attatched to an audio file. I'm not sure if audio files can become infected, since it's never happened to me. However, it can't hurt to do a virus scan on your PC just to make sure you're clean.
Anyway, check all this out, so at least we can sort through the process of elimination. Also, make sure your antivirus definitions are up to date. If you dont have an antivirus software, you can download AVG Free (yup, it's free, updates automatically, and does just as good of a job as Norton or McAffee, which I'll never waste my money on again).
http://www.download.com/AVG-Anti-Virus-Free-Edition/3000-2239_4-10543927.html?tag=lst-0-2
You can still back up your files on a CF card, then transfer them to your PC with an external USB multicard reader. But it would be better to have your PC work with the 1k's hard drive. I can't see you having to spend more money on an external CF reader for the PC when you already went and bought an HDM10 and a hard drive.