Tested my CF card reader on my other iMac and it pops up on the desktop just fine. On mine, it takes numerous attempts at plugging/unplugging hoping it'll power up and show on the desktop.
I wonder if you boot off of the system install DVD if it will show up, so you can see if it's software related. You can probably use Disk Utility on the installer disc to unmount it, then pull it out and reinsert it and see if it shows up in DU again.