For anyone getting into trouble with "Device Initialization Failed" this is how I solved it. I have done this from Windows 7 32bit installed on Virtualbox running on Mac.
1) Assuming that you installed everything as suggested, download the newest version of FLIP from
http://www.atmel.com/tools/flip.aspx (At the time of writing this the last version is 3.4.7, thus change that when moving to Program Files folder)
2) (My) c2500 uses
at32uc3a3256 chip from Atmel and FLIP doesn't have GUI version of
at32uc3a3256 to load, so it has to be flashed from command line interface using
batchisp.exe.
3) Move
firmware.elf from
C:\Program Files\McIntosh Laboratory\USB Audio Update\bin to
C:\Program Files\Atmel\Flip 3.4.7\bin
4) Connect USB, open
cmd.exe and switch to
C:\Program Files\Atmel\Flip 3.4.7\bin
5) Issue the following commands one by one:
set DFU=batchisp -device at32uc3a3256 -hardware usb
%DFU% -operation erase f memory flash blankcheck loadbuffer firmware.elf program verify
%DFU% -operation start reset 0
6) Switch off c2500, unplug the usb cable, wait for few seconds and turn it on again
That should be it.
My 2c.