Driver software whenever i insert an external hardware there is an indication that "driver software is being installed " but after scannin the entire comp there is driver software not installed. please help me with this

As far as the message that you have indicated, the term "the software is being installed convinced you to think that it has found the driver.
Kindly don't dwell so much on this message as it does not nessearily mean that the driver has been found instead if the hardware is a printer, then insert the driver cd that came with it same case with other hardwares.
Do not yet conclude that it is not compatible with your current operating system because you haven't yet installed the right software for it.
Solution: Insert the compact disk that came with the hardware of check on the web for compatible drivers.
Let me know if this solved your problem.

The hardware has to be vista compatible and the manufacturer can provide the vista driver for that hardware. If they do not support vista for your hardware, then it is not vista compatible. Microsoft has a lot of drivers for a lot of devices, but there are more devices out there that are not ready for vista. Goto the device manufacturer and see if they have a driver for vista.