Do you have a hard cap on the SQL memory usage? It may be trying to grab extra memory and can't due to the other applications that are running on...

I see the error less with sp3a, although it does still occur...just one of those minor annoyances

I'd agree with the logs on a RAID1 or 10. I'd put nothing on a raid0 except my desktop.

How about the MDAC version? Both 2.8?

Also see http://support.microsoft.com/default.aspx?scid=kb;en-us;331697

Check to see if you have an SMS client running on the machine, if so, disable it and see if you still get the error.

It's a bug, just disconnect from the server and then reconnect, everything should be good.

Loca LAN, same domain?

By the looks of things it sends the result of the query as an attachment, is that right?

Is there a high number of transactions on a consistent basis? And is the logfile out on another physical device?

If you have a high number of transactions I would look...

Do your datafiles also relate to seperate physical devices?

Check out the following link to a Q article for troubleshooting DTC problems through a firewall

http://support.microsoft.com/default.aspx?scid=kb;EN-US;306843

Any firewall between the two servers?

If you have a version with @query that would be awesome, it'd save me a lot of work regarding dumping queries to text files and then having to attach those...

If you remove guest and public rights from the databases on the server then users will no longer be able to see them in QA.