One thing is not clear to me, Do you have two different OS in one PC or you have 2 pcs one running xp and other win server 2003
The pop up message can be ignored its not a big deal, just hit ok. I think it has something to do with driver for some hardware, i've never looked into it in detail.but it is minor issue and will not cause any problems

For your USB flash Drive. Follow these steps:
1.Right click my computer and click Manage or  Start> controlpanel>administrative tool>computer management.
In win 2003 server you can click start and administrative tools and computer management.
2. click on disk management.
3. You will see you flash drive there but there may not be a drive letter assign to it.
4. right click and click Assign Drive Letter. Give it a letter name like F or G
Open my computer, you will be able to see your drive.