I.ve been wrestling with thie same IR Hardware not detected thing with no sucess. i just now came across a site discussing this problem and one suggestion caught my interest and after trying it i think it;s the solution. it's pretty simple as follows :
Media Center Settings
Select > I WILL MANUALLY CONFIGURE MY TV SIGNAL
Select > ANTENNA ( i dont care what you are plugged into)
Select > Analog-Only Antenna (same as above)
Select > Return To TV Settings - unless you really want guide listings
Select > Finish
you have now by-passed the IR Control Device - you have to use a cable input and not an S-Video or
Composit input..
P.S. i have MCE 2005 Win XP with a satellite receiver and i didn't see step 3 (analog only) but it worked fine
the only hitch was i wound up set to channel 2 and had to horse around to get it changed to Channel 3