That's extremely strange. Mine has the exact same console output and works fine. If the devices are shown in the Device drop down, the drivers are clearly installed correctly and I'm not sure what the issue could be.
I'm not sure if the two output lines you showed are for the same miner or two different ones, but is device 0 the one you mean to be using?
All I can think for you to do is try opening a command prompt and running the same command as you see in the console (in other words launching poclbm directly) and see if you get anything more descriptive in the command prompt output.
I'm sure I'm doing something really obviously wrong here, but I have no idea what it is. Whenever I click the "Start mining!" button, it doesn't start mining. Both my GPU and my CPU are showing up in the Device drop down menu. I have an AMD Phenom II X4 CPU & an AMD Radeon HD 5770 GPU. Here's what my console is showing (I tried running it with flags and without):
2011-06-11 19:13:58: Running command: poclbm.exe --user=###.### --pass=### -o mining.bitcoin.cz -p 8332 --device=0 --platform=0 --verbose -v -w128
2011-06-11 19:15:03: Running command: poclbm.exe --user=###.### --pass=### -o mining.bitcoin.cz -p 8332 --device=0 --platform=0 --verbose
I restarted my machine and ran CCleaner and suddenly it works! And it works at about 2.5X what I was getting before I tried your miner! I ran CCleaner simply because I've been meaning to, not because I thought it would fix this. And, I don't know if it or the restart was what fixed this issue. But, hey! I'm running faster than I ever have! Thanks so much!
I forgot to add in the extra flags. I'm now getting triple the Mhash/s rate I was getting before!