My web search revealed little on this error.
It is basically the program "crying like a baby" and you have to guess what's wrong.
I think (and I could be wrong) the routine can't find any data to work with and says "Huh?" Then translates that into "HRESULT E_FAIL has been returned from a call to a COM component". If the processing extents don't coincide with the data, then this is what happens. This could be why things don't work well over the network (the link to the data gets scrambled). But then again, this is just my guess...
Check to see that your processing extent covers your data. Check/Set this in the menu "Geoprocessing>Environments>Processing Extent". On occasion, I've found that this fixes the problem.