USB stick appearing as hard disk drive, not removable storage device
The problem, appears, is not Windows but the device itself. For some reason, the device is registering itself as a Mass Storage device, not a Removable Storage device.
A nifty program I found via this blog entry called BootIt solved the problem for me in a jiffy: simply switch on the "removable bit"! Unplug and replug, and you're set to go.
I understand there's a bloatware version of this program all over the internet. See if you can get version 1.07; that gets the job done.
Additional bonus of being able to switch the "removable" bit: you can partition your flash drive!