Passcode cannot be set error message iPhone 3G

Ive installed an ActiveSync profile for work and it works pretty well. My e-mail gets pushed very reliably, contacts and calendar sync work very well also. The problem is that, once in a while, I get the message that says:
Passcode cannot be set
Then, it talks about how the server is not responding. It asks if I want to close the dialog or retry. I usually click Retry. Clicking Retry does not always work unfortunately. It just pops up the exact same message. When I get stuck in the loop, I click the Close button instead and almost always it stops prompting me (almost always). If it does success, I have to open the mail app and go into the mailbox in question to make sure it connects to the server and downloads all the new messages.
If anyone has any suggestions on how to resolve this issue, that would be great.
MacBook Pro Mac OS X (10.6.2) iPhone 3G, ActiveSync