Offline File Synchronization -- ACCESS DENIED

I have two laptops that will not sync users offline files or will randomly fail syncing with Access Denied as the only error message.

Problem turned out to be caused by the Dell Embassy Wave Systems suite. In particular the WavXDocMgr program was causing the problem.

A quick way to test if this is your problem is to kill WavXDocMgr in Windows Task Manager.

Ended up just disabling it in msconfig.