I had a similar problem when trying to flash my Nexus s with CyberGR mod.
Tried pretty much everything from trying to wipe system/dalvik/cache/factory reset and also disabled signature check.
Nothing really happened, i kept getting the error again.
Then i had flashed the recovery image (had a TWRP 2.0 running... changed it to CWM) and then the flash went on just fine.
So my guess is that this something to do with the recovery ROM. I would want to ensure that the recovery image used by the dev and mentioned in the install instructions be used.
Hope this helps.