Recently, I had to hard reset my HTC Touch phone running Windows Mobile 6.1. Post that, I couldn’t connect my Touch with the PC using Active Sync (Windows Mobile Device Center). That is, WMDC stopped popping up, when plugging the phone through USB.
I was troubleshooting and thought that WMDC might have been corrupted and went ahead and removed it. I reinstalled, did soft reset of the phone, restarted the machine and did everything that I could see in some forums.
The phone would be detected by the system, but HTC Touch icon wouldn’t show up in the drive explorer (usually HTC Touch shows up as a device along with C,D and any other drives you have)
I was thinking the issue must be with the mode that I use to connect the Phone to the PC.
Whenever you connect your Touch device to your PC, it asks the mode “Active Sync” or “Disk Drive” or “Internet Sharing” I ensured that it is set to Active Sync so that WMDC can recognize it. Didn’t help. I changed the mode to “Disk Drive” and then it showed up in the explorer like a USB storage device. Still not there 
Then, in one of the forums it is mentioned as “Unclick "’Enable advanced network functionality’”
That did the trick although the option is different. So, here below are the steps in case your WMDC doesn’t recognize your HTC Touch.
1. Make sure your Phone is plugged through USB to the PC and the USB hub doesn’t have any issues/loose connections
2. On your phone, click start->settings->connections->USB to PC
3. Make sure “ActiveSync (Sync with Outlook) is selected
4. Make sure “Enable faster data synchronization” is UNCHECKED (it is also mentioned over there)
5. Click “Ok”
6. Thereafter, the drivers get installed and WMDC starts recognizing your HTC Touch
7. Breathe a sigh of relief 
This post assumes you have Windows Vista or Windows 7 as well as HTC Touch 1 or 2 or above.
Cheers!!!