Thanks for you help everyone.
I not possible to use safely eject as both HDs are set as removable and only give pop up saying drives still in use.
I have uninstalled and reinstalled every USB item in the USB stack. No resolution.
Below are other things I have tried and found
1: There is no problems with connecting / disconnecting flashdrives or memory sticks. The letters are released and they retain their drive letters when reconnected. Even if I forget to use safely remove option.
2: have used the trouble shooter, it found errors and said it fixed them but did not resolve the drive letter problem.
3: have tried uninstalling the Items in the USB stack in device manager, but did not resolve the releasing of the drive letters.
4: There is not any problems with drive letters if start in safe mode, or log in to the hidden administrator account.
5: Have disabled all startup programs in msconfig and rebooted but problem still exists the letters are not released.
6: Both HDs have same problem even though one is connected via Esata and the other via USB, so uninstalling the USB stack would have had no effect on the Esata one.