My PC runs XP just fine in every respect. Adding USB device is working too. Just that it won't boot up with the USB device already attached. The boot up screen finds the Video card and stays there and won't proceed to show the version of CPU.

I have tried to resolve this by configuring the BIOS. No luck. Wonder if there is some silly setting that I don't know about.

Is the bios boot up sequence set to HardDrive as first bootable device?
Are there any wakeup devices in bios like USB

It could require a bios update, but this part can be critical, even users with many years of experience can kill a motherboard through bios update (not even the manufacture takes responsibility for these provided updates)

offending device is an IrDA

An infra-red doogle stops the system from booting up. All other kinds of USB devices are OK.
This is not a Bootable device issue, as the boot-up process hasn't even started exploring what bootable devices are available. Wake-up on USB is disabled.

It could require a BIOS update. I will probably live with this (by not leaving the IrDA) plugged in.