I use DPM to backup a few servers, in a pilot group, and I was trying to add one to a protection group.  I kept getting this error every time I tried to modify the protection group to add another server:

Modify protection group: *Protection Group Name* failed:
Error 360: The operation failed due to a virtual disk service error
Error details: Unknown error (0x80042420)
Recommended action: Retry the operation.

I couldn't figure out the problem until I saw a post on this that mentioned there could be a problem using RDP.  Then I remembered that I can never do disk configuration unless I use a console session.  In order to configure disks it seems you have to be in "Session 0".  If you have to do this remotely, using "mstsc /console" for XP or 2003, or "mstsc /admin" for Vista will put you in "Session 0" just as if you were sitting at the console.