Was this escalated to TAC already? We just had a similar case come in. Either way, I think your problem is that your default location does not exist in the directory. Here's a technote you can use to diagnose and perhaps address the problem.
Introduction
This technote describes a problem that can occur in Unity 3.0(3) or 3.0(4). This particular problem occurs when an earlier version of Unity was used to update the Active Directory schema, but that version of Unity was not installed. Instead, Unity 3.0(3) or 3.0(4) was installed. Now the directory handler doesn’t work.
Symptom
All searches using the directory handler encounter failsafe after entering the name to search on. For each failure, five errors are logged in the application event log. The first error can be used to identify this problem.
Event Type: Error
Event Source: AvConvMsg_MC
Event ID: 10002
Date: 1/16/2002
Time: 12:28:47 PM
User: N/A
Computer: MN-UNITY
Description:
IAvDohLocation::Get(AVP_DISTINGUISHED_NAME) returned [0x80004005] on line 7199 of file h:\CommSvr\Sources\AvConvUtilities\AvConvAddrSearchSvr\AvSAddrSearcher.cpp
Running conversation AD on Port 3
Running conversation AddrSearchConv on Port 3
If this error matches what you see on your system, look in Active Directory in the Unity / Locations container (use Advanced Features view to see this container). If the default location object (named defaultxxxxxxxx) is missing from the Locations container, use the Step-by-Step below to fix the problem.
Step-By-Step
On the schema master:
1) From the Unity 3.0(3) or 3.0(4) CD set, browse to and run \ADSchemaSetup\ADSchemaSetup.exe.
2) Check the first option ‘Exchange 2000 directory monitor’, and uncheck the second option.
3) Click OK to run the program.
4) Click OK at the window ‘The scripts have been run successfully” to exit the program
Note: Schema changes may take some time to replicate through the forest. The next set of steps must be performed after replication of the schema is finished.
On the Unity server:
1) From a command prompt, run \Commserver\ConfigurationSetup\setup –sync
2) Click Next. This may take some time, depending on how many users your domain contains.
3) Click Finish when setup has completed.
To verify that the problem is fixed, again look in Active Directory in the Unity / Locations container to verify that the default location has been created.
