I've experienced this problem from time to time and I believe this message is a roundabout way of saying "the processor is dead". Sometimes this may be nothing more than the JTAG isn't connected properly so your board will live to work another day. In any event you'll have to restart the system to fully clear the error.
I don't think the version of CCS is relevant. You'll get exactly the same message from CCS3.1 as you'll get from CCS5.5, the only difference being that in 3.1 you're more likely to have a visible 'reset emulator' option on the Debug menu.
[TI would do us all a favor but upgrading their emulator interfaces and diagnostics. CCS5 caters well to those who want to build complex software on stock hardware but its not that good with custom hardware which may or may not be working correctly.]