I have latest version of PC Suite installed, but have trouble getting the phone connected to the pc. When I plug into the USB, I chose Phone Mode and File Transfer. All with the same result. PC Suite can't get connected to my phone.

Any ideas how to resolve this?

The SE PC Suite, in my opinion, is quite resource hogging and not user friendly. If you have bluetooth on your PC, why not try using FMA. It's an open source PC suite for sony ericsson phones. I have tried, it works well with my old K530i.