I had this problem. I use Windows 7 Home Premium 64 bit. In short, what I had to do was reinstall the drivers from Moto about six times.
In more length, I ended up downloading the 4.5 drivers (Droid Life linked to 4.2) and installing over the old ones. This didn't work, so I uninstalled the drivers, ran CCleaner's reg cleaner, rebooted, ran the cleaner again, rebooted, installed the 4.5 drivers fresh. I then rebooted (third time in this sequence), put my handset into flash mode (or whatever the 'up' and power button mode is), plugged it in, opened RSD and, well, it worked.
Also, remember to run RSD in Admin mode.
You'll get there. I'm now running Pete's stock 2.1 update.zip with root, flashed with Chevy's LV 5 slot 1GHz kernel via SetCPU.
EDIT: I should say, my reported error was a string of zeroes with a seven at the end (something like 0x0007). I think.