Cannot unlock my nexus 5

I'm a rookie with android so sorry to insult anyone with dumb questions....

I sent my sons phone to LG and they sent it back to me saying water damage unrepairable...
The problem seemed to be we could not charge the phone.... Lo and behold we can now charge the phone so Yeah! but unfortunately we got all sorts of google errors .... After more research, I see that LG changed the Android version to some testdebug version.

My "About phone" says

Android version - KeyLimePie
Baseband version - M8974A-1.0.25.0.15
Kernel version - 3.4.0-gaf7416a-00002-g97abe44 / manseok.yang@OASIS #1 / Thu Apr17 10:56:17 KST 2014
Build number - aosp_hammerhead-userdebug KeyLimePie / FAC140417_KRT01B PDK853385 test-keys

I want to reflash the Nexus 5 to original factory version (preferably the latest) but everything I try fails and I get stuck usually on the unlock bootloader step. I've tried to use wugfresh's nexus root toolkit v2.0.5 but get errors like
Information: Checking ADB/FASTBOOT Connectivity
adb devices
adb server is out of date. killing...

I also tried using fastboot (CMD line) commands. Got the following:

C:\Users\Desktop_Admin>fastboot devices
0923ad35022ac46f fastboot

C:\Users\Desktop_Admin>fastboot oem unlock
< waiting for device >
...
FAILED (command write failed (Unknown error))
finished. total time: 5.005s


Maybe I need to do stuff manually????
Seems I can never unlock the bootloader on the phone so that could be the stumbling block to let me do other stuff.

I'm loosing my mind here so I don't really know which way to spin anymore....

Thanks for any help!
Rob