I had the exact same issue today and like ours HJB, it started working in much the same way yours did. Then I was able to load some basic example code and I thought everything was great! However, it failed again and I have also tried it on and XP machine, a Windows 7 32 bit and an Ubuntu 10.10 machine all with the same failure to connect. The symptoms are exactly as you describe.
If anyone can assist I would be grateful I don't want to buy a new board, especially if I don't know what caused this one not to work properly after connecting it for the first time today.