I have the same problem with the DEMO9S08LC60. The person using it said he was downloading a program through the USB connection and when it got to the 100% downloaded it hung up at that point. He gave the board to me to try on my PC and it gives the same messages as you got.
The board is powered up and the USB interface chip's (on the back side of the board) clock is running.
I tried uninstalling and reinstalling the Softec operating system with the same result. I figure the board is blown up and ordered another. Hopefully the new board will work. If not I'll remove all of the Codewarrior software and Softec software and reinstall it. But I don't see it being the software.
If you find an answer let me know at rsockey@cbgbiotech.com. thanks