Hi everyone! I registered an account just to share this great and so simple fix I found if you're getting the error message "USB device has malfunctioned so Windows does not recognize it". I have a MyBook Essential 1TB 2.0 (without the Smartware) and my computer is a Windows XP SP2 and that is the problem I had.
Well all you have to do is just unplug your computer from the wall! Yes, that's it! I couldn't believe it either. But the reason why it works is because when you just turn off your computer the regular way (without unplugging it) the motherboard is still being powered. But when you unplug the computer and then plug it back in again, the motherboard will reload the drivers and walah! USB ports work again! Just make sure you shut off the computer the regular way first and then unplug it and wait a few minutes before plugging it back in again.
Before I had found this solution I had plugged in my camera into the same USB port and it worked just fine, so it was only MyBook that was not being recognized. I found this fix on some other website.
I realize this may not help in all instances but I really hope it helps someone who is desperately trying to get their external hard drive working again.