I recently came across this problem on my reporting services server when a user attempts to save a report from a model to their my reports folder
The permissions granted to user X are insufficient for performing this operation. ---> The permissions granted to user 'X' are insufficient for performing this operation.
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Exception of type 'Microsoft.ReportingServices.RsProxy.AccessDeniedException' was thrown.
It seems that this problem is due to SQL server 2005 SP2 being applied because it worked fine until this was installed. The work around as far as I can tell was originally posted here and I used this solution to fix the problem for myself.
Basically it boils down to the default save location has changed to the Models folder and the user has no rights on this folder. By granting them read only rights they are then able to navigate to their own folder to save the report.