Yes, I did. BBH Tool does that. I also tried not shrinking the OS and deleting both files - in the App Loader directory and the copy in my roaming profile on Windows 7.
Again, what's odd is that during the backup of the device, it's recognized as a valid USB device. Once the App Loader tries to connect to the device rom, it reboots and is not recognized by Windows USB until the App Loader times out at which point it is recognized by Windows USB.