Dave,
Even though you're connected to the net, it is still fairly common to have some firewall, proxy or other software on your machine block Digital Edition's communication with the server. Basically there was a problem with the headers being sent from the webservices on our activation server back to your machine.
This is essentially what we document in "Error "Adobe DRM Error" when you activate Digital Editions or access an eBook" at http://www.adobe.com/go/kb402747, only I need to add a bit more technical detail about the headers, which I'll try to do this week..
Ooh, I found the info:
Make sure the firewall is using port 80 and NO CACHE is on
Make sure that the firewall allows your browser and Reader/Acrobat to connect to http://aractivate.adobe.com
Here's the list of all the HTTP headers Reader uses--open them for both directions. The ports are the standard HTTP ports. (Reader doesn't use SSL.)
x-EBX-Version
x-ABX-Client
x-EBX-Authenticate
x-EBX-Authorization
x-EBX-Authenticationinfo
x-EBX-Authinfo2
---------
SOAPAction
Accept-Language
accept
Connection
Pragma
Cache-Control
I'll get this added to the technote. Hopefully it'll get you on your way. But to be truthful these kind of firewall/proxy issues can be hard to figure out sometimes. Sometimes (if possible) it's easier to take the machine to another network..