I had this problem the other day trying to update a geocode index for an ArcIMS application. I could load the SDE layer fine into author, but when i clicked on the geocode tool, the geocode tool window never displayed - it was just a grayed out form window.
When I issued the sdemon command to show users connected, the connection from ArcIMS showed something about "string too long" where the OS host is usually listed.
That's just a warning that the hostname string exceeds the display format available to 'sdemon' for one-line display. It's probably not related to the geocoding error. - V