I need to use my phone as emulator/target/virtual device when I run my application.
I have installed HTC Sync and the USB driver is in order.
I have enabled the USB Debuggin
Even if you have installed the USB driver, there might be a lurking wrong USB registration with Windows. You can use USBDeview to check the registered drivers and remove all entries for your phone before plugging it in, then choose the driver from the SDK when asked.