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Apparently, they're giving out special USB keys that simply get around Microsoft's security, allowing the holder of the key to very quickly get forensic information (including internet surfing history), passwords and supposedly encrypted data off of a laptop. While you can understand why police like this, the very fact that the backdoor is there and that a bunch of these USB keys are out there pretty much guarantees that those with nefarious intent also have such keys.
COFEE, according to forensic folk who have used it, is simply a suite of 150 bundled off-the-shelf forensic tools that run from a script. None of the tools are new or were created by Microsoft. Microsoft simply combined existing programs into a portable tool that can be used in the field before agents bring a computer back to their forensic lab