A little bit of update on the issue. Last night I checked the 'proc' for info on the scanner and could not find any reference. The /proc/bus/usb/devices lists all other USB devices but the scanner. I am not very knowledgeable in the area of kernel modules and drivers but looks to me the problem lays in that area. Even from some HOWTOs I checked seems it is even lower level than scanner driver may be USB driver.
Any way I tried the LSBE 1.0 and it recognized the scanner and it worked perfectly under it as it was with all previous releases of LS. So I can say very confidently it is SL3.4a specific issue. If no body comes with any suggestion on how to get the scanner working seems I will have to switch to LSBE even if I like a lot the 3D effects (getting the job done is more important to me than eye candy)
Any advise is very welcome. May be copying some .config files from LSBE to LS3.4a or rebuilding certain package (may be USB drivers).