I encountered the same error message when running various ArcHdro Tools from the ArcToolBox, and even the the vector and raster location cannot be setup. However, the tools work fine if they are run from the Toolbar. I have no idea what's wrong with the Arc Hydro GP Tools. I am struggling with this, since if the GP tools don't work properly there's no way to incorporate them in the python script. Hope someone would have an answer. Ming
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