Hi Leesteel,
You r trying to help and thank you so much for that. I have verified all the steps you mentioned:
#1 make sure you have all OSX updates in place. - Done
#2 test your USB port with some other device. - Done and it works fine, in fact even with POD HDEdit
#3 Uninstall Monkey and reinstall. Make sure Monkey is up to date. - Done, upgraded to 1.7 current latest
#4 Look for my thread titled "follow the bouncing monkey" you might find a clue, compare your own folders. - I had already run into this problem, and resolved it through the same steps mentioned in this thread - before I reported this issue
#5 Monkey should prompt you to upgrade USB also. - It does not
Hope some one has a solution to this, or support guys resolve my ticket soon..