Let me just start by saying, I'm sorry you've had such trouble getting your spartan 3E board working.
I wanted to post to clear up one point of confusion. Nate suggested
He didn't suggest that you buy the JTAG programming cable but suggested that you use iMPACT to program the board. I can understand your confusion based on the wording of his suggestion, so let me clear it up for you. All Digilent boards contain a JTAG programming circuit natively so they do not need JTAG cables, as is indicated on the product pages for the JTAG cables. iMPACT is the correct software to program the board, so as long as you are using iMPACT, you should be able to connect to the board.
When I searched around for this problem I found the USB cable installation guide from Xilinx. You can follow the directions here to reinstall cable drivers, since you and Nate have figured out it is a cable driver issue. I would also highly suggest that you download the latest version of ISE. It's possible that this is an issue with the version you are using, that was subsequently fixed.