Thanks for the reply Josh. Unfortunately that didn't work, but I actually got some help from kmanuel over @ XDA.
In case anyone else has the problem, it turns out that it was because I'm running XP on my desktop. XP requires special drivers. The further problem was that I tried installing them, they weren't installed in the drivers folder, they were in another folder labeled 'DRVSTORE'.
Anyway, if you're getting the New Hardware Wizard when you're connecting in DIAG mode, check out this thread - worked for me & kmanuel!
http://forum.xda-developers.com/showthread.php?t=462712