You have helped someone...me! I was getting error 000229 trying to batch merge and buffer 10 or so layers and had tried various work-arounds including removing them from grouplayers but nothing worked. Clicked background processing off and it worked flawlessly. Thank you for posting this!
Helped me, too. A tip o' the compass to you! I was mystified as to why a simple "clip" would not work, especially since my feature classes were entirely accessible and not grouped. Couldn't figure out what on Geo was going on (of course this is ESRI, and their "help" was anything but...).
Then I read Brendan's post: found and un-selected the "background processing" box, which I had never ticked (but which was ticking me off), and suddenly the clip worked.
I am getting the Union Error #000229 - Unable to open source layer
I have tried several solutions to no avail:
1. Copying the datasets to another file location (desktop, shared network drive, etc.)
2. Renaming the geodatabase and the source files
3. Exporting the source files as shapefiles (.shp)
4. Completely restarting a new project and inserting the files and retrying the Union.
NOTHING has worked! Its ironic because this is simple geoprocessing task that was set up in a tutorial through ESRI.
I have contacted ESRI support and waiting for a call. I will repost if I get a solution.
To all those who are interested, I have not spoken with ESRI Support yet, but me and my team have come up with a solution to this issue:
Personal geodatabases have been phased out for computers running 64 bit versions of ArcGIS:
http://resources.arcgis.com/en/help/main/10.1/index.html#//00vp0000002t001324
All of the new computers are 64 bit, and a lot of the older CAD/power machines are 64 bit.
The solution is to create File Geodatabases and export the data you need to a shapefile then import it as a feature class to your new file geodatabase. Go to your project or open Catalog, run the Union tool using the new feature classes (you will have to reset the data source in your project). Remember to store your output in a separate file geodatabase. I don't believe the Union tool will allow you to store the output in the same field geodatabase as the feature classes being processed.
Happy GISing!