Virtualization is simply awesome. Thanks to maturity in this technology, I do not have to set up so many machines (besides, I cannot afford it) just to test or experiment with so many different environments and configurations. But one can get carried away and end up with a large stash of virtual machines.
My primary means of control virtual/guest machines is to enable Remote Desktop so I can connect direct from my workstation. But, I do not need to control all of them that often, so Virtual Server 2005's VMRC has been a useful alternative, allowing me to view the virtual machine's "physical" video display output. When Hyper-V came into the picture, I was somewhat confused how one can perform this same activity, as it was a radical (read: incompatible) departure from Virtual Server 2005; VMRC is not usable here.
This bother soon turned into a brief relief as Windows Vista was provided with the Hyper-V Manager MMC. I lost no time installing it, only to lose time wondering why I get the error message mentioned in the title above. As a domain-less workgroup, I use the same administrator user account with the same password across my computers; this provides a near-seamless authentication experience. Up until now. Why??? Turns out, the way Hyper-V manager works is not to flow a network connection one way from my client workstation to the Hyper-V server; there is also a network connection flowing back from the server to my workstation. In order for that to happen successfully without security restriction, I had to follow Adrian Dimcev's instructions to grant Remote Access to ANONYMOUS LOGON under DCOM configuration.
Once that restriction was lifted, I was able to resume my seamless access experience.