Sharepoint Integration - User Cannot Be Found??

My topology is as follows:

Moss 2007 is installed on one server while sql2005-Sp2 is installed on a
seperate server. I installed the web front-end of sharepoint services 3.0 on
my report server. I also changed the port of my default website from 80 to
8080 so that they dont conflict.

I run the reporting service configuration app and created a new report
database that had sharepoint integration switched on. Furthermore I created a
new app pool in IIS that has a domain account instead of network service (as
described in the microsoft instructions) and used another domain account as the
windows service identity .


After that I installed the sharepoint add-in on the moss 2007 server. After
doing so the reporting configuration app showed a green light for sharepoint
integration. I went to application management and found the section for
reporting services.

Now... allthough Manage integration settings and Grant database access work
the third option "Set server defaults" produces the following error:



An unexpected error occurred while connecting to the report server. Verify that the report server is available and configured for SharePoint integrated mode. --> Server was unable to process request. ---> The request failed with HTTP status 401: Unauthorized.




When I try to access the report server through http: i.e.
http://bla:8080/reportserver I get :

Reporting Services Error
--------------------------------------------------------------------------------

Report Server has encountered a SharePoint error. (rsSharePointError) Get
Online Help
User cannot be found.

My trace log file complains about the following: (around 10 times the same message per try)



w3wp!security!1!4/17/2007-19:00:31:: i INFO: Exception while running with elevated privileges
w3wp!security!1!4/17/2007-19:00:31:: i INFO: The permissions granted to user 'NTSRVDOMAINAdministrator' are insufficient for performing this operation.
w3wp!library!1!4/17/2007-19:00:31:: e ERROR: Throwing Microsoft.ReportingServices.Diagnostics.Utilities.AccessDeniedException: The permissions granted to user 'NTSRVDOMAINAdministrator' are insufficient for performing this operation., ;
Info: Microsoft.ReportingServices.Diagnostics.Utilities.AccessDeniedException: The permissions granted to user 'NTSRVDOMAINAdministrator' are insufficient for performing this operation.
w3wp!security!1!4/17/2007-19:00:31:: i INFO: Exception while running with elevated privileges
w3wp!security!1!4/17/2007-19:00:31:: i INFO: The permissions granted to user 'NTSRVDOMAINAdministrator' are insufficient for performing this operation.
w3wp!library!1!4/17/2007-19:00:31:: e ERROR: Throwing Microsoft.ReportingServices.Diagnostics.Utilities.SharePointException: Report Server has encountered a SharePoint error., ;
Info: Microsoft.ReportingServices.Diagnostics.Utilities.SharePointException: Report Server has encountered a SharePoint error. ---> Microsoft.SharePoint.SPException: User cannot be found.




Please help.. I've now spent 2 days on this and I am getting nowhere!!



Thanks!