[agoetz5201]

Both phones were never used before and this was their first time.. No other processes were used before this one.. Do you have Windows UAC active?

As far as the error.. If the was your first flash on the phone then when your phone went into bootload your OS was installing another driver when the Update Utility timed out. Just let the OS find the phone... (it installes a different driver than needed for active sync/Windows mobile device center) then reload the Update Utility the next time it will not timeout because the driver is already installed.

Ya"ll are runing the app from the .bat file inside the folder right? only that one needs to be launched