I'm not able to reproduce this problem. I just tried it on the demo site selecting sales.xml and sales.xsl from the dropdown list and it worked fine. Make sure you are not entering something in the Url textboxes if you use the dropdown. Make sure the files exist on disk and have correct file permissions. Though the error looks more like a networking error. Make sure the server can resolve the host name of the site correctly either via its DNS servers or via the hosts file. Make sure xml and xsl mime types are defined on the server.
Best,
Joe