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Does anyone know of some freeware software which will enable me to use a usb device on a hyper-v virtual machine? Done a google search but nothing. Surely someone has achieved this :S
Well as you have already discovered, hyper-v doesnt like USB passthrough.
I had a similar situation trying to connect a serial modem to a guest. Ultimately until ms pull their finger out the best way to do it is using serial over Ethernet.. Or in your case USB over Ethernet like http://usbip.sourceforge.net. This requires a Linux host but it can be a windows guest or I'm sure you can find a windows to windows solution now that you know what to look for.
Could look at getting a wireless adapter that will go into the ethernet port and connected wirelessly. Sometimes known as a gaming adapter as belkin call it.