I've had the same problem with the automatic download feature. Pretty sure it is due to the fact that I have to go through a proxy. Basically I just set aside a few hours to do a mass-downloading of pretty much every module I could find. You then place the downloaded *.zip files in your modules/archive directory of your installation. You could of course just download the modules that you actually need though. I just downloaded them all so that I wouldn't have to go searching every time I try out a new theme. :) Then, when you install/switch-to the new theme, hitting download will grab them from your modules/archive folder intead of the internet, and it should work out alright.

So, where do you download them from? Try going to this page and searching down the list. That's where I got mine anyways. I think there is another suggested site in the step.rc file if you can't find what you're after at shellfront.org.

On a bit of a topic diversion, just started using LiteStep yesterday, and I must say that I think it is fantastic. :) Keep going with it, even if you can't get it going properly straight away. It is worth the effort in my opinion.