Yeah I know all too well how Windows can just pretend it hasn't got anything to install.
I would suggest to try safemode (f8 at bootup) yet earlier windows (the fact you have to install a driver yourself) do not detect usb devices, as my usb mouse used to stop working in safemode, though you could try it.
Plus you could try installing it manually. Has the driver cd you got by any chance got an EXE file to install it automatically? Or has it only got an Inf file for you to do manually from add/remove hardware.
Go to control panel though, and to System.
Then go to the hardware tab, and to Device Manager.
Now open some of those, and check for a name that sounds like the phone (will have a question mark or an 'X' if its not working or installed right)
and un-install it from here by opening up the properties of it if its there, because since if it failed the first time, doing it again could just make things worse.
Then go to Add/Remove Hardware in the Control Panel with the phone plugged in and let it scan for new devices. Now if it finds it, insert the driver disc and browse for it.
I hope this helps