I have had the same problem since I went to an XP machine. I was able to get
a round it by copying a form with the report viewer from a prior project. I
can and new reports, along as I check no to the Crystal Report Expert option
to add a form containing the Crystal Report Veiwer control. If I check yes,
I get the same error.

Hope this helps.

This is a known problem with Crystal Reports 8.5 running on Windows XP.
Please disregard my prior post.

The correct work around is at

http://support.crystaldecisions.com/library/kbase/articles/c2010966.asp