Goombah,

I don't know why it wouldn't let you download the movie into hard drive, but is your hard drive by any chance connected via a USB port? That could tie up the connection between your camcorder and hard dive. In addition you'd have to remove any device connected to your USBs even if they don't function at the time. They still keep some of bandwidth to themselves.

As I mentioned before you'll not be able to download Mpeg-2, which is suitable for burning on DVD as DV-AVI. The maximum resolution you'll get via USB would be Mpeg-1, which would be good enough to be burned as a VCD, on a normal CD.