In our article, SharePoint SSL Integration Challenge with SQL 2008 Report Services, we speculated that the issue had to do with the local server and SSL.  Indeed, the proxy that SharePoint becomes for reaching SQL Reporting Services is the problem when all services are on one box.

Microsoft has created a security lock down called a “loopback” check.  This prevents certain HTTP services to run right when called on the same box.  Based on this article, we enabled a switch to “DisableLoopbackCheck” so that it would allow for HTTP services to work as expected.

We now have SharePoint Windows Services (WSS 3.0) working over the internet with SSL connections to SQL Reporting Services 2008.