I am seeing it too. Yes it appears to be environmental, but how and why? You folks seem to blame everything on someone else. Well maybe it is someone else, esp. in this case, but its still not helpfull and does not go to solving anything.
You (the original coders) are the only ones we can hope who would possibly be able to figure out this kind of thing.
Now my info: In two test environments I do not get this error, but in a subfolder on my host (set as a seperate app) I do get it.
Sounds almost like its seeing both webconfigs (in the root app and in the sub app) but no one can verrify this.
Also, I did not use the web-ready - this is my own build of 3.1 without any changes except connection string(of course) and theme.
-Angier