Aaron,
You mentioned the C6657 board. When you connect the emulator to your PC do you see the DS1 and DS2 LEDs lit?
Also, when you are running the Test connection do you see DS2 turn off and DS3 blink for a bit while data is transferred?
The reason I am asking this is to have an idea if the hardware could be at fault.
One additional detail: are you selecting the Texas Instruments XDS2xx USB Onboard Emulator or the plain Texas Instruments XDS2xx USB Emulator when connecting to your board? The former works with all CCS licenses, while the latter only works with a fully licensed CCS.
Another detail could be related to the Operating System you are using: XDS200 uses Microsoft's CDC device driver implementation and I was never able to make it work properly in Vista. Windows 7 and 8/8.1 work fine.
Also, I have used the XDS200 successfully with the TI emulation package you are using, (5.1.232.0), but I currently use a newer release (5.1.340.0). That should not be a blocking issue, but you may give a try updating this particular component of CCS (check here on how to access the update component option in CCS)
The error you are getting in the Test Connection is the same as if the emulator was simply unplugged from the USB port, therefore I wonder if there is something wrong that allows the USB host to detect the device, initialize it but somehow any further data transfers are being barred from completion.
In this case I would try the emulator in a different PC or switch the USB cable or USB ports, especially if this is connected through a USB HUB as it may not be able to provide enough power to the port. According to USBDeview, the XDS200 requests 500mA from its port.
Apart from these details above, I really can't think of anything else other than a faulty XDS200 emulator.
Hope this helps,
Rafael