I have my Insteon PLM working now with relase 961 (7.0.4).
I had to remove Insteon, reconnect and add it back in. Then I had to go to the apps section under Develop Apps and Serial port configuration. The last option there...Used by device, change it to INSTEON NETWORK[]
Note: I had two INSTEON NETWORK devices...one was from a failed install (don't know how to delete it). When I selected the wrong one, I still got the No Insteon message at the top of the UI. When I selected the correct one. That error went away and when I added a device, it worked.