It isn't fixed but I found a workaround after opening a case with PSS.
The issue seems to be related to the TFS server sitting in an AD which has a one way trust with the AD that the user accounts are stored in. The error is caused by a SOAP subscription to notifications of build check ins. Any time a build is checked in a SOAP notification is supposed to be sent to a web service to kick off a build for Continuous Integration (using the sample code off MSDN).
As long as an AD account out of the user AD is used, the notification fails. If the subscription is created using a local machine account on the TFS app tier server the error goes away.
tomf |