This problem has to do with an issue that comes up after you apply a hotfix to your servers. Essentially it enforces new security rules. To resolve it add the Sharepoint service account to the Box Administrators, WSS_ADMIN_WPG and WSS_RESTRICTED_WPG. Once this is done reset your IIS and you should be good to go.

Props to Søren Nielsen for the following post:
http://soerennielsen.wordpress.com/2008/02/08/make-the-search-work-for-you/

Technorati Tags: Configuration, search, Security, SharePoint