Be sure your device is connected to your PC via the USB cable. So open DM and then open Backup and Restore Tab. From here select the backup tab. Your DM will ask you to select a location for the file you want to restore to your device. This is where you will select that file you found.
So give me some details about this connection error. When does it exactly give you the error? Upon connection? Is it when you are selecting one of the functions to perform an action such as app loader or backup restore? As many details as you can please....