I had exactly the same issue but managed to get it working.
Read "part 1" of this thread. [GUIDE] Step by Step ROOT Nexus S via ClockworkMod Recovery image (i9020 only) - xda-developers
This is what worked for me, a slight variation from the XDA developers thread:
I unplugged my Nexus S from the computer
I installed and ran USBDeview and I deleted all of the duplicate drivers for my Nexus S (you can order by serial number to make it easy).
· I rebooted Windows
· I put the Nexus S into fastboot and connected to the computer.
· I selected the driver I wanted to install by doing the following *Important - do not let windows do this automatically because it will either install the wrong driver or not find the driver *:
1) Do a manual driver selection.
2) Navigate the google_usb_driver directory in the SDK.
3) Manually select a driver. You want the "fastboot" one. My version of Windows (7) complained about the driver being unsigned but I selected continue to force the install.
· Run "fastboot devices" and the device should now be visible.