I too get the same error you decribed. What I was told is the service SQL Server (MSSQLSERVER) cannot be run as a local user or local network. It has to be set up as a domain admin user within Active Directory. Although I have tried this and it doesn't work either. I am getting a bit agitated with this error as I have been trying to deal with this problem for close to 2 weeks now.

Any ideas on where to look toward next?