We've been having a similar problem today. We have multiple clients that connect to the same report server. The failure message reported to the user in the report viewer was the vague '..internal error occurred on the report server....etc'. However, it was very inconsistent. Some clients were working fine and some were not, then they would connect, then suddenly they could not. The Event Viewer on the reporting server reported the 'cannot connect to the report server database' error. We rebooted the report server and got temporarily relief but then the problem cropped up again.

Looking through the reporting services log files I found that one of the reports being run had logged a datasource error (ambiguous column). I have fixed the ambiguous column error and am hoping that the other issues magically disappear but am a little wary as it is strange that a datasource error would cause the report server to not be able to connect to the report server database.

Previously I'm almost certain that datasource errors (embarassing as it is) were displayed to the user in the report viewer window so I'm not sure why all we're getting now is the 'internal error occured'. Quite a bit less helpful!