I am experiencing the "Device Not Selected" error as well. I suspect the lack of windows updates may be the issue, specifically related to the .net portion. Currently installing them, I will update once I am able to follow the quick start guide instructions and re-install.
I should note that this issue arises only on my desktop running Win 7 Ultimate 64bit, AMD dual-core 2.30 GHz. My laptop with an inferior processor and Win 7 32bit is able to run SDR# without issue (just very, very slowly). The updated RTL-SDR Blog dongle is what I am utilizing for a sdr at the moment.
I have followed the instructions on the quick start guide successfully before so I know what is involved there. I had to download Zadig separately on the laptop and it was labeled as "Zadig 2.2". However, when running install-rtlsdr, it was able to install a version labeled simply as "Zadig". That being said, I may just skip straight to running the "2.2" version because it had worked on the laptop.