When configuring log shipping on a highly transactional environment (with SQL Clustering setup), we were hit by above error. All the Logins and their privileges are intact within the primary and standby servers along with Local server policies & group policies. Initial thought of the error brings up permissions issue while copying the file from Primary server to Secondary server, in this case ensure the SQL Server Agent account is using a domain based account with relevant 'ADMIN' or 'NECESSARY'...(
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Read the complete post at http://sqlserver-qa.net/blogs/ha/archive/2007/10/03/log-shipping-error-unable-to-copy-the-initialization-file.aspx