Adding, removing or editing permissions of a user in SSRS 2008 is throwing error “”Response is not well-formed XML

I am totally stumped by a really stubborn problem: When I try to take any action (add, remove, edit) in the Security tab of a report's Properties page on SSRS 2008 UI I get a generic error. All it says is this: Response is not well-formed XML.

Digging in the LogFiles folder at the SSRS installation root, I see this:

role assignment is not valid. The role assignment is either empty,
specifies a user or group name that is already used in an existing
role assignment for the current item, or specifies duplicate roles for
the same user or group. ui!ReportManager_0-1!32c!07/23/2011-15:03:33::
e ERROR: Response is not well-formed XML.
ui!ReportManager_0-1!32c!07/23/2011-15:03:33:: e ERROR: HTTP status
code –> 500
——-Details——– System.InvalidOperationException: Response is
not well-formed XML. —> System.Xml.XmlException: Unexpected end of
file has occurred. The following elements are not closed: Message,
detail, soap:Fault, soap:Body, soap:Envelope. Line 3, position 5470.

at System.Xml.XmlTextReaderImpl.Throw(Exception e)

at System.Xml.XmlTextReaderImpl.ThrowUnclosedElements()

at System.Xml.XmlTextReaderImpl.ParseElementContent()

at System.Xml.XmlLoader.LoadNode(Boolean skipOverWhitespace)

at System.Xml.XmlLoader.ReadCurrentNode(XmlDocument doc, XmlReader
reader)

at System.Xml.XmlDocument.ReadNode(XmlReader reader)

at
System.Web.Services.Protocols.SoapHttpClientProtocol.ReadSoapException(XmlReader
reader)

at
System.Web.Services.Protocols.SoapHttpClientProtocol.ReadResponse(SoapClientMessage
message, WebResponse response, Stream responseStream, Boolean
asyncCall)

at
System.Web.Services.Protocols.SoapHttpClientProtocol.Invoke(String
methodName, Object[] parameters)

— End of inner exception stack trace —

at
System.Web.Services.Protocols.SoapHttpClientProtocol.Invoke(String
methodName, Object[] parameters)

at
Microsoft.SqlServer.ReportingServices2005.ReportingService2005.SetPolicies(String
Item, Policy[] Policies)

at
Microsoft.SqlServer.ReportingServices2005.RSConnection.SetPolicies(String
Item, Policy[] Policies)

at
Microsoft.ReportingServices.UI.ImageTextButton.RaisePostBackEvent(String
eventArgument)

at System.Web.UI.Page.RaisePostBackEvent(IPostBackEventHandler
sourceControl, String eventArgument)

at System.Web.UI.Page.ProcessRequestMain(Boolean
includeStagesBeforeAsyncPoint, Boolean includeStagesAfterAsyncPoint)
library!ReportServer_0-2!a14!07/23/2011-15:03:33:: Call to
GetSystemPropertiesAction().
ui!ReportManager_0-1!32c!07/23/2011-15:03:33:: e ERROR: Exception in
ShowErrorPage: System.Threading.ThreadAbortException: Thread was being
aborted. at System.Threading.Thread.AbortInternal() at
System.Threading.Thread.Abort(Object stateInfo) at
System.Web.HttpResponse.End() at
Microsoft.ReportingServices.UI.ReportingPage.ShowErrorPage(String
errMsg) at at System.Threading.Thread.AbortInternal() at
System.Threading.Thread.Abort(Object stateInfo) at
System.Web.HttpResponse.End() at
Microsoft.ReportingServices.UI.ReportingPage.ShowErrorPage(String
errMsg)

The databases (ReportServer and ReportServerTempDB) came out clean when I ran DBCC CHECKDB.

This error is preventing me to do any of the following actions:
1. Use "Edit Item Security" for a report or folder
2. Delete a User name from the Home folder Security page
3. Add a new user using "New Role Assignment"

The really weird thing is that some of these 3 actions work in some report folders. There is nothing I can see common between the ones that work and those that don't.

Any ideas??