Some time ago we run into problem with Project Server Integration. Problem was with exporting project from Dynamics AX to Project Server. The hierarchy of activities and tasks did not appear correctly in Microsoft Office Project 2007 client. What is interesting the hierarchy in Project Web Access was shown correctly. It took us quite a long time to find where the problem is. In the end problem has been fixed in August Cumulative Update for Project Server 2007. So if you plan MS Project Integration with Dynamics AX please remember to apply this CU.
August CU for Project Server 2007: http://support.microsoft.com/kb/2276475
Update 30 June 2011:
It happens that even after applying August CU for very big projects (more than 200 activities) you will still encounter the problem. You would need the apply following hotfix package: http://support.microsoft.com/kb/2544400