I have the same problem, but I cannot fix it.
Till now I used CW 10.2 with my USB Multilink without any problem on my Windows 7 PC.
To check the hardware connection between my custom Kinetis K60 board and my USB Multilink I try to erase the whole device with the Flash File to Target command procedure.
With CW 10.2 the check is always succesfull.
Now I installed CW 10.4 and try the hardware connection with the same custom board and USB Multilink.
The first time I run my erase check I saw CW 10.4 performing a firmware update on my USB Multilink, but then I get an error while connecting to the target ("The Debugger can not connect to the P&E device"). In every subsequent my attempt I get the same error.
I close CW 10.4, restart CW 10.2 and try the same check on the same board: succesfull!
I checked the PnE driver is good (yes, with CW 10.2 is working).
I think something is wrong in CW 10.4 with USB Multilink. Is there any CW patch about it?
Thanks.