"Windows cannot access the specified device..." with removable storage

I'm installing a replacement Windows 7 machine, 64-bit. I've read lots (feels like hundreds) of web pages on this topic, but haven't found any that help... including here, but I may be searching badly.

I cannot get any executable to run from removable media - CD/USB stick, etc. It always gives the "Windows cannot access the specified device..." message. If I copy the file from the removable media to the hard drive,m it runs with no problem.

I check the group policies: Group (on the Domain Controller) has all the "deny..." options as "Not Configured". I tried setting the "deny_execute" options to "disabled" in the local policy database: no affect.

I also looked for any "deny_execute" in the registry: nothing enabled.