OK here goes....
We have an MS consultant here who is stumped adn so are his support people.
We are buildin a test environment with A CRM Server, DB Server and a Report Services Server. The SQL Server is 2005 SP2 and the Report server is just running Report Services and SP2. When configuring the Database connection in RSCM we are able to create the Virtual Directory for both Report Server and Report manager. We are able to set the Web identity. We are able to connect thru the DB Server in DB Setup. When we get to the database name and click new this is the error/warning it gives and will not create the DB.
Verifying Database Edition
The Feature" Using other editions of SQL Server for report data sources and/or the report server database" is not supported in this edition of Reporting Services.