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Is it any .dmg or is it just a specific one? This error can sometimes mean that it is corrupted from downloading or it can mean that there is no partition map for the OS to mount onto (which is usually the case with certain installer medias, like Ubuntu).

Also, you can try and mount the .dmg from the command line in the Terminal.app found below:
http://osxdaily.com/2011/12/17/mount-a-dmg-from-the-command-line-in-mac-os-x/
 
If you can open those .dmg files from a different user account -
Maybe try the diskimage pref files for your user account.

Delete these files from your user Library/Preferences folder:
com.apple.diskimages.fsck
com.apple.frameworks.diskimages.diuiagent.plist
com.apple.frameworks.diskimages.plist
com.apple.frameworks.diskimages.uiagent.plist
(if you don't find those files, you are in the wrong Library folder.)
Quickest way to your user Library is from the Go menu in the Finder, while holding your Option key.

Drag those files to your trash. Log out and log back in to your user, or simply restart your Mac.
 
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This worked:

If you can open those .dmg files from a different user account -
Maybe try the diskimage pref files for your user account.

Delete these files from your user Library/Preferences folder:
com.apple.diskimages.fsck
com.apple.frameworks.diskimages.diuiagent.plist
com.apple.frameworks.diskimages.plist
com.apple.frameworks.diskimages.uiagent.plist
(if you don't find those files, you are in the wrong Library folder.)
Quickest way to your user Library is from the Go menu in the Finder, while holding your Option key.

Drag those files to your trash. Log out and log back in to your user, or simply restart your Mac.
 
So, try deleting the same set of files again. There's something in your user account that is "disturbing" the image mounting software, and it will take some experimenting to find out where that is.
I would probably next try deleting the Caches folder from your user folder. Drag that folder to your trash.
Restart your Mac, then empty the trash (you can't empty the caches folder completely until you restart)
Added to those files that I mentioned - try these files
com.apple.BezelServices.plist
com.apple.diskimages.fsck
com.apple.systemuiserver.plist

Drag those to the trash. Restart again (or just log out, then log back in to your user)
 
So, try deleting the same set of files again. There's something in your user account that is "disturbing" the image mounting software, and it will take some experimenting to find out where that is.
I would probably next try deleting the Caches folder from your user folder. Drag that folder to your trash.
Restart your Mac, then empty the trash (you can't empty the caches folder completely until you restart)
Added to those files that I mentioned - try these files
com.apple.BezelServices.plist
com.apple.diskimages.fsck
com.apple.systemuiserver.plist

Drag those to the trash. Restart again (or just log out, then log back in to your user)
Thanks, givinv this a try.

I reinstalled OSX and the .dmg issue is fixed (from a restore, not fresh) but USB still not showing. Let me see the new fix and get back to you.
 
Does your Disk Utility show the USB drive?
You can also look in your System Information, under either the Storage, or the USB tab.
 
Does your Disk Utility show the USB drive?
You can also look in your System Information, under either the Storage, or the USB tab.
Yes!

And DMG files now open. But USB No go. Tried with different devices that work on my iMac.

Got an apple store appointment at 7pm today
[doublepost=1459009028][/doublepost]
Yes!

And DMG files now open. But USB No go. Tried with different devices that work on my iMac.

Got an apple store appointment at 7pm today

Ok

This is crazy but everything works now... !!!
 
.... But USB No go. Tried with different devices that work on my iMac.
...
hmmm
What does " USB No go" mean?
You do not see any USB devices in your System Information?
Do any USB storage (flash drive, etc) devices appear in any way in your Disk Utility?
 
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