In the versions of Microsoft Windows SharePoint Services that are earlier than Windows SharePoint Services SP2, you could write a document library event handler that used the object model without explicit impersonation to access Windows SharePoint Services.

I spent 4 hours wondering why I couldnt get this to work and then found the following MS article saying that SP2 had "changed this behaviour by design !"

Full Article at: Document library event handlers that use object model code without explicit impersonation fail with the "Cannot complete this action" error message after Windows SharePoint Services Service Pack 2 is installed.

(I found it via another very helpfull blog by Mike Walsh of WSS FAQ from a goggle list of WSS updates)