Ugh, nothing more frustrating than yesterday. All of the sudden when I plugged my iPhone 3G into the laptop it wasn't popping up the option to select which app to use to transfer the photos. Then, in Scanners and Cameras Windows XP didn't seen the iPhone! Double UGH!
With the iPhone 3G plugged in to the laptop I went into Control Panel -> Administrative Tools -> Device Manager and saw under the USB entries one for "Apple iPhone" which I deleted. Immediately XP found new hardware and installed a different driver called "Apple Mobile Device USB driver" ?? Dunno what is going on but now the iPhone 3G is getting recognized and I can transfer the photos over.
This has to be some weird interaction with iTunes as I installed iTunes AFTER I had been plugging the iPhone into the laptop.