I believe your player must be in MSC mode to update the firmware. If your player is in MTP mode, that may be causing your error msg. To switch, go to SETTINGS > USB Mode.
PLus, I think the failure is to with the installer on Windows as opposed to trying to access player. I get this error wven when the MP3 is not plugged in as the first response to trying to run the updater program.
This is a critical error. It looks like SansaDispatch is not running on your machine (check under your Windows Task Manager if SansaDispatch is running).
You may try to launch it manually under “C:\Documents and Settings\YOURUSERNAME\Application Data\SanDisk\Sansa Updater\SansaDispatch.exe”
or just uninstall the updater and install again. If the SansaDispatch cannot run on your machine, the updater will not work.