After installing Microsoft Dynamics CRM 3.0 and wanting to use the reports it gives you an error: Reports.config has invalid schema. I have seen this problem to much lately and i will give you some possible steps to resolve. There is a KB article as well: 914079
It has to do with the fact that .NET 2.0 is installed prior to installing Microsoft Dynamics CRM.
Steps to Resolve:
Step 1. Register .NET 1.1
a. Click Start, click Run, and then type in CMD to open a command prompt window
from the Microsoft CRM Server.
b. Change directories to get to the directory
C:\WINNT\Microsoft.Net\Framework\V1.1.4322 (where WINNT = your default Windows
system directory and V1.1.4322 = the current version of Microsoft.Net Framework
that is installed). Note You may want to use Windows Explorer to see the directory structure before typing the following change directory commands.To switch to this directory directly, type the following command: CD c:\winnt\Microsoft.Net\Framework\V1.1.4322
c. Once in the Microsoft.Net Framework directory, run the following command:
aspnet_regiis.exe -r Note You will need to wait anywhere from a minute to a few minutes for this command to complete and return the cursor to the command prompt window.
Confirm that the CRM website is using .NET 1.1 in IIS Manager. Right Click on the website and go to properties. Click on the ASP.NET tab. Verify that 1.1.4322 is selected. This should be .NET 1.1 SP1 or later.
Switch the SRS Virtual Directories to use .NET 2.0
On the SRS Website Locate the Reports Virtual Directory. Right Click on the virtual directory and go to properties. Click on the ASP.NET tab. Verify that 2.0 is selected. Once this is done reboot the server.