(rsLogonFailed) Logon failure: unknown user name or bad password

I have been struggling to get SSRS up and running in my local environment apparently due to permissions issues. 

In VS2010 my software (which runs fine on production) throws an exception when calling this line:

reportViewer1.ServerReport.SetParameters(param);

The exception is:

The report server has encountered a configuration error. Logon failed for the unattended execution account. (rsServerConfigurationError)
Inner exception: Log on failed. Ensure the user name and password are correct. (rsLogonFailed)
Inner exception: Logon failure: unknown user name or bad password

In SSRS manager, the "Test Connection" button when viewing the data source yields the result "Connection created successfully." I am also able to manage the report in SSRS. However, when I attempt to run the report, I see this message:

• The report server has encountered a configuration error. Logon failed for the unattended execution account. (rsServerConfigurationError)
  • Log on failed. Ensure the user name and password are correct. (rsLogonFailed)
    • Logon failure: unknown user name or bad password 

I have the following configuration:

• SSRS is configured on local machine
• A report has been uploaded which runs correctly in production
• Report is associated with data source using Windows integrated security and connection string "Data Source=localhost; Initial Catalog=MyDatabase"
• My domain username (DOMAIN\myname) is added to the Security site settings in SSRS manager (http://MyMachine/Reports) with the role System Administrator. (Also tried both roles System Administrator, System User, as well as doing the same for the "BUILTIN\Administrators user", but this did not change the result)
• My domain username (DOMAIN\myname) is set up in SQL and mapped to the ReportServer db as well as MyDatabase. This is the account to which I am currently logged in.

I am certain that the report is correctly linked to the data source, as I was getting a different configuration error message until it was set up.

I have tried viewing the report in SSRS as myself and running IE as Administrator, but the result has not changed.

I have tried everything I can think of and cannot get past this hurdle. Any help would be greatly appreciated.