Chony:
OK, so if the screen changes it suggests the USB connection is physically sound.
When you get the "failed" message have you been back to the Set up menu to see if the In and Outputs (Ty2/Digital Workstation) are
still highlighted correctly as you originally set them or have they reverted to non highlighted condition?
If the latter, reset them in both the small window and the Setup menu and try again.
What Windows OS are you using- XP 32bit/64bit or Vista?
If Vista there is a later PC editor software version downloadable from one of the Yam sites (I don't have the link to hand at present) which helped some people although my own older version worked OK with Vista anyway.
Am also wondering if the Yam driver you are using on PC is the latest version.
If you go to this link there are Yam drivers for various OS versions including Vista.
If necessary you can download the latest for your Windows version.
http://music.yamaha.com/products/downloads.html?productId=805 Presume you have the latest OS version in Ty2? Latest so called firmware upgrade is also available at the above link.
Apart from that am starting to run out of ideas unless you have some more observations
John