I know it's free but does it work on 2008 R2?

Does it work with SSMS 2008 R2?

I'm not sure here but I think the string is too long. Maybe not the best solution but try to remove a couple of zeros at the end.

convert(datetime,substring('5/27/2013 16:42:37.490000',0,23))

In ssis...

I think this might help you:

http://sqlblog.com/blogs/rushabh_mehta/archive/2008/04/24/gracefully-handing-task-error-in-ssis-package.aspx

How do you execute the package? SQL Server Agent? In that case you might have to set up a proxy account with a user that has rights to read from...