I am also getting the same exact error message when attempting to upload the blink sketch to the LilyPad with the USB/Serial adapter.
My settings are as follows:
Windows Vista Home Basic
Arduino 10
LilyPad Arduino
Arduino Serial USB Board
COM 4
LilyPad = selected as board type in software
Halted all firewalls and virus protections = still happening
LilyPad will flash the on board LED when powered up and approximately every 5-6 seconds while powered and it will power an LED hooked to pin 13
I have tried it with 5 volts from USB and 3.7 volts from external Lithium Battery and the results are the same.
One thing I just noticed is that in the picture on Sparkfun's website, there are 3 pins on the jumper on the Arduino Serial USB Board. I only have two pins on mine. I'm at work now and dont have the Arduino Serial USB Board in front of me, so I cant say if there is an empty hole where the third pin should be. ----OR---- should there really be a third pin?????
I have scoured (sp?) the forum and have not found any difinitive solution to this problem that several of us are reporting. Also, it seems to happen on different OS's and different Arduino's (LiliPad, Diecimilia, BT, and Mini). Possibly could be a problem with Arduino 10?????