Reporting a connect failure when it doesn't actually fail

I am sorry you are experiencing this behavior. Could you please provide me with the log so I can investigate further. If you are able to provide the test itself so I can reproduce this on my side I can look for a workaround as well. We should determine why the step is failing and correct that.

Looking forward to hearing from you.

It's a very simple test, here are the steps:
Using the Base URL - https://repair.alldata.com/alldata/
Navigate to : '/'
Click 'RecoverLoginLink'
Connect to pop-up window : 'http://support.alldata.com/article/email-us'
Verify element 'EmailUsSpan' 'is' visible.
Close pop-up window : 'http://support.alldata.com/article/email-us'

Here is the execution log:

Overall Result: Fail
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'7/5/2013 2:21:44 PM' - Using .Net Runtime version: '4.0.30319.296' for test execution. Build version is '2012.2.1527.0'.
'7/5/2013 2:21:44 PM' - Starting execution....
------------------------------------------------------------
------------------------------------------------------------
'7/5/2013 2:21:47 PM' - Enabling Html Popup Tracker. Test expecting Popups.
'7/5/2013 2:21:47 PM' - Using 'InternetExplorer' version '10.0' as default browser.
'7/5/2013 2:21:54 PM' - 'Pass' : 1. Navigate to : '/'
'7/5/2013 2:21:55 PM' - 'Pass' : 2. Click 'RecoverLoginLink'
'7/5/2013 2:22:00 PM' - 'Fail' : 3. Connect to pop-up window : 'http://support.alldata.com/article/email-us'
------------------------------------------------------------
Failure Information:
~~~~~~~~~~~~~~~
Exception occurred waiting for the new browser to connect.
InnerException:
System.OperationCanceledException: Exception occurred waiting for the new browser to connect. ---> System.TimeoutException: Wait for condition has timed out
   at ArtOfTest.Common.WaitSync.CheckResult(WaitSync wait, String extraExceptionInfo, Object target)
   at ArtOfTest.Common.WaitSync.For[T](Predicate`1 predicate, T target, Boolean invertCondition, Int32 timeout, WaitResultType errorResultType)
   at ArtOfTest.Common.WaitSync.For[T](Predicate`1 predicate, T target, Boolean invertCondition, Int32 timeout)
   at ArtOfTest.WebAii.Core.Manager.WaitForNewBrowserConnect(String url, Boolean isPartial, Int32 timeout)
   --- End of inner exception stack trace ---
   at ArtOfTest.WebAii.Core.Manager.WaitForNewBrowserConnect(String url, Boolean isPartial, Int32 timeout)
   at ArtOfTest.WebAii.Design.IntrinsicTranslators.Descriptors.HtmlDialogHandlerDescriptor.Execute(Browser browser)
   at ArtOfTest.WebAii.Design.Extensibility.HtmlActionDescriptor.Execute(IAutomationHost autoHost)
   at ArtOfTest.WebAii.Design.Execution.ExecutionEngine.ExecuteStep(Int32 order)
------------------------------------------------------------
'7/5/2013 2:22:00 PM' - Detected a failure. Step is marked 'ContinueOnFailure=True' continuing test execution.
'7/5/2013 2:22:00 PM' - 'Pass' : 4. Verify element 'EmailUsSpan' 'is' visible.
'7/5/2013 2:22:01 PM' - 'Pass' : 5. Close pop-up window : 'http://support.alldata.com/article/email-us'
------------------------------------------------------------
'7/5/2013 2:22:01 PM' - Overall Result: Fail
'7/5/2013 2:22:01 PM' - Duration: [0 min: 13 sec: 854 msec]
------------------------------------------------------------
'7/5/2013 2:22:02 PM' - Test completed!

Following your step by step instructions does not reproduce the problem you are experiencing. Here is how this is working on my end. In order to overcome this issue please make sure your browser is calibrated. Another thing I would like you to check is whether you have the UAC (user account control) activated on your machine, if yes please proceed with disabling the UAC. Please note that a restart of your system is required in order to take effect.
Please also try to disable all the add-ons you are using in the IE browser and give it a try.