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This is one of the first major impact 2010 issue we’ve experienced at EPM Partners, and so even though the problem is not yet closed, it’s about time it was added to the blog.
Problem:
For no apparent reason when attempting to Save a project from Microsoft Project Professional 2007 to the Project Server 2010 the following error is displayed:

(Text for Google: The file cannot be opened. … Project files saved in a version earlier than Microsoft Project 98 can’t be opened. If your file is from an earlier version … save in MPX format …)
After selecting Ok, any subsequent attempts to save report the following error:

(Text: An unexpected error occurred during command execution.)
This problem ONLY occurs with Project 2007 client version and attempting to open and save the file in Project 2010 will work as expected. Also it’s worth noting that once the error appears on one client, all clients will be unable to save the project.
Finally it is definitely not related to legacy projects, I have seen it occur on a test dozen line project based on a blank template.
Cause:
Unknown at this stage, although it is definitely some sort of corruption, likely in the Resource Sheet which can be proved by deleting all resources and resaving which will work immediately! It seems that the 2010 client has better error handling / correcting or perhaps that the 2007 client is introducing some errors!
Resolution:
We have spent many hours on this issue with Microsoft as it seriously impacted one of Microsoft’s largest Asia-Pac 2010 customers, in the end with the support of a Microsoft PFE (onsite engineer) a resolution was found in the yet-to-be-released beta October Cumulative Update for Project Pro 2007.
So there is light at the end of the tunnel, however the problem is not yet closed, so far with over a week of testing post-cu this issue hasn’t reoccurred, but this is definitely one to watch out for!
We have just migrated from server 2007 to server 2010. Client is still 2007. I have only been 'playing' for 3 days now, this exact issue appeared yesterday...and since then every project i attempt to open / save...errors out like this. If another associate - opens that same project saves and publishes it from their workstation - i then have access to it...works as normal. I was thinking it was my client...any news on the latest update release? I was going to have IT re-install client, but if a patch is coming...
15 Oct 2011, Traves
Try kb2028571
It solves my problem.
8 Aug 2011, Dikhi Wahyudi, www.mitrais.com