SSRS 2005 on server 2008 issues with running reports from new server in cluster

I have a SSRS 2005 report environment made up of 2 load balanced servers. One server has been up and running on its own for some time now.. However I recently rebuilt the second server with SSRS 2005 installed on windows 2008 64bit. I installed the instances with no real issues and then went to the original server and exported (backed up ) the encryption keys and restored to the new server that I just built. I was then able to connect to the instance and then run through the initialization process with no issue. However now that I can access the site on the new report server I get the following error when trying to run/open a report

An error has occurred during report processing. (rsProcessingAborted)
Cannot impersonate user for data source '10000A'. (rsErrorImpersonatingUser)
Logon failed. (rsLogonFailed)
Logon failure: the user has not been granted the requested logon type at this computer. (Exception from HRESULT: 0x80070569)

Im not sure where to go with this error now. However some of the things that I can say are:
Windows Identity Service account is an AD account which is in the local Administrators group on both servers.
Web Service Identity Account is the same AD account and has been working on the original server for some time now.
SSRS 2005 SP4 CU 3 and the patch level is the same on both Servers.

I dont know if it matters or not but here is the entire stack trace from the Report Server Log. I would greatly appreciate any help as this is driving me up the wall..

   at Microsoft.ReportingServices.ReportProcessing.ReportProcessing.ReportRuntimeDataSourceNode.Process()
   at Microsoft.ReportingServices.ReportProcessing.ReportProcessing.RuntimeDataSourceNode.ProcessConcurrent(Object threadSet)
w3wp!processing!8!9/17/2013-23:59:57:: i INFO: Merge abort handler called. Aborting data sources ...
w3wp!processing!8!9/17/2013-23:59:57:: e ERROR: Throwing Microsoft.ReportingServices.ReportProcessing.ProcessingAbortedException: An error has occurred during report processing., ;
 Info: Microsoft.ReportingServices.ReportProcessing.ProcessingAbortedException: An error has occurred during report processing. ---> Microsoft.ReportingServices.ReportProcessing.ReportProcessingException: Cannot impersonate user for data source '10000A'. ---> Microsoft.ReportingServices.Diagnostics.Utilities.LogonFailedException: Logon failed. ---> System.Runtime.InteropServices.COMException (0x80070569): Logon failure: the user has not been granted the requested logon type at this computer. (Exception from HRESULT: 0x80070569)
   at System.Runtime.InteropServices.Marshal.ThrowExceptionForHRInternal(Int32 errorCode, IntPtr errorInfo)
   at RSRemoteRpcClient.RemoteLogon.GetRemoteImpToken(String pRPCEndpointName, Int32 type, Guid dataSourceId, String pUserName, String pDomain, String pPassword)
   at Microsoft.ReportingServices.Diagnostics.ImpersonationContext.Login(CredentialsType credType, Guid dataSourceId, String userName, String userPwd, String domain)
   --- End of inner exception stack trace ---



BTW.. Thanks in advance:)