Look for solutions at this post:
http://forums.arcgis.com/threads/48100-ArcHydro-Problem-Solvers
I Google searched the error and found this.
Hello everyone,
All my DEM Reconditioning problems have always been solved by making sure my raster DEM and vector RIVER layers are in the same geographic and projected coordinate system.
I would also follow Mark's advice by setting up the target vector and raster workspaces, setting the processing extent to the appropriate level, working off my local 'C:' drive, making sure my vector attribute table has the appropriate information in order to satisfy the tool inputs and then cross my fingers.