thank you people for your replies.
I have formatted my drives and then reinstalled. I dont have any service packs installed. I doubt whether this could pose any problem. Anyways I'll give it a try.
Also the plug n play service is started and is automatic startup type...so that seems to be ok.
this is what I see in device manager
What I dont understand is why one USB controller is being shown in Other devices. I dont remember how it was before I reinstalled my XP.I have tried installing it but am unable to do so. It isnt being installed automatically and always comes up when PC reboots. Found new hardware - "USB controller"