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I loaded ArcTutor and copied the folder "C:\arcgis\ArcTutor\Parcel Editing" to "C:\Users\Public\Documents".
I then tried to publish ParcelEditing.mxd as a map service using ArcMap. It fails with the "base table definition string is invalid" error being discussed here.
ESRI support suggested adding the arcgis account to folder so I did. No difference. In fact I don't think that doing this should be necessary since the SERVICE group has access and both the ArcGISServer and ArcSOC processes are a member of the SERVICE group.
What does work to is to create a folder C:\GisData and then give the arcgis account access to it. So there is a permission issue here but it is not related to the arcgis account.
Seems like a bug to me. Let's see what ESRI support comes back with.
I was having the same problem as is discussed in this thread. I was also getting this error:
Error: Error handling service request : Cannot obtain a free instance.; nested exception is: com.esri.arcgis.discovery.ejb.ArcGISServerEJBException: com.esri.arcgis.discovery.servicelib.AGSException: AutomationException: 0x80004005 - Unspecified error
Code: 500
Granting the ArcGIS Server user full security on the folder with my data resolved both problems.