So I just ran into this as well with my new Kindle 3 but found solution.
My Kindle 3 was asleep when i plugged it into my computer for the first time. The computer said that it was installing the device driver, then said the process could not be complete and computer does not recognize device. I tried to turn on the Kindle but it was locked up. I then unplugged the USB, then had to do a reset (hold the slider over for 15 seconds). I booted up the Kindle WITHOUT having the USB hooked up. Once it was fully awake and usable, I re-plugged in USB and my computer instantly recognized it and I am able to transfer files easily.
It also has a message on the screen now that says "If you want to read or shop on your Kindle while continuing to charge over USB, please keep the USB cable attached, but eject your Kindle from your computer".
So, go to "My Computer", then right click on "Kindle", then press "eject" and you should be able to charge the Kindle using the supplied USB cable from Amazon.
1. Make sure the Kindle is fully awake before plugging in USB cable, then computer should recognize (and not lock up the Kindle).
2. Make sure to keep cable connected and "eject" device if you want to charge from USB