I think you are doing it wrong. You say in step 3 that you "downloaded several epubs into the Color Nook." No, you should download them to your PC. Then drag and drop them into ADE. After doing so, the epubs will be in the ADE library and can then be transferred to the Nook.
I kind of forget how to do that, but hopefully someone else can take it from here. I think when you have the Nook connected and you select a book in the ADE library view, a button may appear that says transfer to Nook, or maybe it is via a right-mouse click on the book?
I know you can use Windows Explorer to copy the epub from the ADE library directly to the Nook. The ADE library is in a folder like this:
c:\Users\Richard\Documents\My Digital Editions\book_name.epub
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