Domain Username not resolving - People Picker

Scenario

• You attempt to specify a domain user in any People Picker field within SharePoint 2007 / 3.0
• AD domain users have resolved before.
• The application service is running under a local machine account

Issue

• The username will not resolve.  Instead you get the squiggly red underline.

Resolution

• Workaround: Change the Service Account to a domain user account

I do not know why a local account would exhibit this behaviour nor why this would randomly stop working.  After changing to a domain account temporarily you can change back to a local account, but the issue will occur again.  My guess is that it's environment specific, such as a temporary loss of AD connectivity, which would explain the intermittant occurances.