Once Action Replay for Xbox is installed, launch it, and then minimize it. Connect your xbox formatted USB Drive into the computer.
Now launch USBVIEW, you should see a bunch of stuff, but look for USB Mass Storage Device, and click on it you should see something like this:

My device is 0x457 & 0x0151
Now goto where you installed Action Replay, usually “C:\Program Files\Datel\Action Replay XBOX”. In that folder is a sub folder called Drivers, go there and open XBREADER.INF in Notepad.
In the [_Devices_] part make a new entry with the VID & PID numbers you got from USBVIEW:

My device's VID & PID are 0457 & 0151
Now open up Device Manager, goto Control Panel, open System, click the Hardware tab, then click the Device Manager button.
In Device Manager, open up the Universal Serial Bus controllers, Right Click on USB Mass Storage Device, and select Update Driver.
Then select Install from Specific Location (Advanced), click Next.
Select Don’t search. I will choose the driver to install., click Next.
Select Action Replay Xbox, click Next.
After driver is installed, click Finish, close: Device Manager, System Properties and Control Panel.
Un-minimize Action Replay for Xbox, and you should see on the left side the MEMORY CARD displays memcard, and the AR in the middle of the program is Green, if it is not then you didn't do all of the above correctly.

