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SSRS 2008 - Unable to connect to remote server

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Win2k3 R2 SP2/SQL Server 2008 instance with SSRS/Visual Studio 2008

I installed SQL 2008 and SSRS with native mode default configuration.
All SQL 2008 services are running under "NT Authority\Network Service" account.

When i try to deploy a new report, I get the "Unable to connect to remote server" error.

The deploy operation creates empty folders on the web server (hosted by the SQL Server 2008 service)

for e.g.
my instance name is <machinename>$sql2008. i configured the WebService URL and the Reports Manager URL to port 85

the deploy from VS creates ssrs2008Test folder and a Shared Data Sources folder in the following virtual directory
  - Report Manager URL: http://<machinename>:85/Reports_SQL2008/
  - Web Service URL:
http://<machinename>:85/ReportServer_SQL2008

however these folders are empty w/ no .rdl or .rds file. and i get the
"Unable to connect to remote server"  error in Visual Studio 2008 when i deploy it.

is there something else i have to tweak in either the SQL Server/SSRS Configuration Manager or the Windows Server Settings(like port settings or group policy) to get the reports to work?

thanks
-vt



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