i also had the same problem and this seems to be a weird issue with processes running on your PC. this is what i did to fix it.
1) Turn on your firewall software (ZoneAlarm)
2) Open FlashXP and attempt connection (hopefully this will allow you to login to your xbox but you will get data connection errors - but the main point is that it let you login and it didnt say refuse connection!)
3) Close down Flash XP, and shutdown ZoneAlarm
4) Open FlashXP, and hopefully you can now connect to the xbox!
hope that helps...