I found that switching to a different USB cable got me past that point. Odd, since the "bad" USB cable works fine with other devices. I've read at least one other post where someone else experienced this.
My current problem is that my Leonardo now shows up as "Unknown Device" in Win 7 Device Manager, and no device driver update is allowed. Seems to be a current problem with the Leonardo since I'm reading a lot about it on the forums.
Anyway, I hope it works for you to switch to a new USB cable.