After installing the drivers / on inserting the DMS the drive is not immediately made available. But the PHTSYS and PHTDTA do eventually become available!
It might depend on the capacity of the drive. My genuine PhatNoise 60GB DMS (Fujitsu MHT2060AT) is detected right away. A DMS with a 250GB Western Digital WD2500BEVE sits for around 10-15 minutes and then Windows pops up a complaint saying that device driver software failed to install. This is on the x64 version - I never tried 32-bit Windows 7.
The PhatNoise USB 2 cradle uses a controller chip that has external firmware stored in a flash chip. That firmware was either written or modified by PhatNoise for the cradle, and doesn't like something in newer Windows releases. What you're experiencing sounds a lot like what happens to Mac users as well.
That's why my upcoming solution uses a very popular all-in-one IDE / USB bridge - it is popular enough that Microsoft needs to test for compatibility with it when releasing Windows.