I've never managed a suspected spyware report from an infected machine, but
I've submitted from several clean machines--for me it mostly works, although
occasionally I see the same error message you see.
On other machines I've tested from, I see the same error you do
consistently. I don't believe it relates to any network issue on your
machine.
On the removal issue--I would do Start, run, msconfig <enter>
If you use a third party firewall, disconnect from the Internet before
restarting.
Check off the Diagnostic mode startup, and restart in diagnostic mode.
Scan with both your antispyware products, and maybe an antivirus in
addition.