That's all pretty weird. I'd suggest looking at the trust policy file and the .bak file and ensure that the backup has a version number 1 lower than the current version. Sometimes if manual edits are made, this can be a problem. You may need to get Microsoft's help on this too.
If I were going to spend time trying to diagnose this problem, I'd likely try to find out where the string is getting logged by using Reflector and then I'd zoom in on the logic to try to understand what's wrong.
It would also be helpful to know if that's an FS or agent log. Looks like an FS but I wanted to be sure.