Sunday morning and I am busy setting up a SQL 2008 R2 in a VM but get this error message when trying to add in my service accounts, I checked and double checked the accounts, passwords etc with no luck and then wondered was it something to do with the fact that I had cloned these Virtual machines?.....
I then ran psgetsid.exe on my SQL server and DC and found the problem... duplicate machine Sids :'(
Moral of the story is always use sysprep before cloning a VM :)
which is really obvious when you think about it, oh well...