After searching tons of pages on the web, still no luck.
Until today when I decided to look into device manager.
I went to portable devices->GT I9100.
Right click -> Properties
Driver -> update driver
Search location -> c:\program files (x86)\Samsung\
Now the generic M$oft driver is replaced with a dedicated Samsung driver.
After connecting the phone, it now is correctly recognized as a media device, and KIES no longer complains.

Until today when I decided to look into device manager.
I went to portable devices->GT I9100.
Right click -> Properties
Driver -> update driver
Search location -> c:\program files (x86)\Samsung\
Now the generic M$oft driver is replaced with a dedicated Samsung driver.
After connecting the phone, it now is correctly recognized as a media device, and KIES no longer complains.
