This error indicates that a MSDTC failure has occured in connecting to your SQL server. In Windows Server 2003 SP1 - all network communication is disabled by default. (Assuming that's your platform) - You'll need to configure MSDTC and ensure
that the proper services are running.
On BOTH the SharePoint and SQL computers (assuming they are different machines)
1. Start / Administrative Tools > Component Services
2. On the left navigation tree, go to "Services"
Ensure "Distributed Transaction Coordinator" Service is running (Make startup automatic and start if needed).
2. On the left navigation tree, go to Component Services > Computers
3. Right click on "My Computer", select "Properties"
4. Select the "MSDTC" tab
5. Click "Security Configuration"
6. Check the following checkboxes..
"Network DTC Access"
"Allow Remote Clients"
"Allow Remote Administration"
"Enable TIP" (This option may not be necessary, have a try to get your configuration)
7. Click OK
8. Click "Stop" and then "Start" to restart the MSDTC service
9. YOU MAY NEED TO REBOOT YOUR SERVER
Don't forget to do this procedure on BOTH SharePoint and SQL machines...
See this article for more details...