We have recently migrated all of our workstations to a different Windows domain at our office.  Some folks were getting the following error when trying to open a DataSet in Visual Studio 2005:

Key not valid for use in specified state

The problem is caused because of the change of your username from the old domain to the new domain. This causes Visual Studio to not be able to properly decrypt some its settings.

The fix is to rename/delete the following file:

C:\Documents and Settings\YOUR USERNAME\Application Data\Microsoft\VisualStudio\8.0\ServerExplorer\DefaultView.SEView

You will now have to add back all your databases to the Server Explorer toolbox (but you only have to add them at a later time as you need them).

Thanks to Robert Stam for this tip.