In a response to "Problem with firmware flashing" thread. 
I couldn't easily reply in the original thread so I am writing in a new one.

Hi Alexander,

As Holger mentioned, it seems that both dfu (the one provided with device and dfu-util) are not compatible with each other. I will try to debug this issue a little bit later.
Anyway, I was able to flash the board using an older version of dfu-util on Windows 7.

Here are my steps (on Windows):
1. Download and unpack dfu-util v0.6 (dfu-util-0.6-win32.zip.bz2) from:
http://dfu-util.sourceforge.net/releases/
2. Install USB drivers (http://zadig.akeo.ie/)
3. Enter DFU mode (the red LED should turn on)
4. Flash the device from cmd line
dfu-util -d 16c0:0762 -R -a0 -D sim_forwarder-simtrace-at91sam7s128-flash_dfu.bin

On Linux machine I am using the following configuration:
- Ubuntu 14.04 (natively booted, not VM)
- dfu-util v0.5

--
BR,
Szymon