Gaming iTunes Sync Problem

[Hakoda]

I seem to be having a very unusual problem with my iPod in terms of syncing.

1) It can't sync over 110 songs. If I do, I get "No Content" in the Music App.
2) It won't restore the iPod. (It'll freeze)
3) Album Art is scrambled. (see here)
4) I can't transfer purchases. (It'll freeze)
5) Can't sync videos. (It'll freeze)

I'm running Windows 7 Ultimate x64 with iTunes 10.2.1 x64 with the iPod Touch 4G on 4.3.1, no JB. The above problems disappear if I use my sister's Windows XP or my computer's XP Mode & the iPod functions normally. I have uninstalled all Apple software using Revo Uninstaller and then reinstalled iTunes. I have deleted my library and recompiled it. I have tried a different USB port. I have restored the iPod (using a Win XP machine). I have used a new USB Connector Cable from Apple. I have gone into Device Manager and uninstalled all USB controllers. iPod passes iTunes Diagnostics. My BIOS is up-to-date.

Does anyone have any suggestions? Doing an upgrade installation of Win 7 is last resort but I can't think of anything else.