Checking Google and CRM Forums it seems like there are a lot of people with this error. A common mistake is creating a report in a new version of Visual Studio (2008) and targeting an older version of SQL (2005) reporting services. This was not my problem, and I had been able to upload reports before.
Now, not exactly sure why, but I have had issues with reports on CRM before, and the process of playing around with encryption keys has resolved some issues.
On the SQL Report Server, I went to Start -> All Programs -> Microsoft SQL Server 2008 -> Configuration Tools -> Reporting Services Configuration Manager
I clicked connect and then clicked on encryption keys, and then backup. 
I entered a filename and path, passwords and that was it!
I exited Reporting Services Configuration Manager and I could now upload custom CRM reports with ease.
I hope this helps someone in the future. If anyone could give an explanation why this would fix it, I would appreciate it!
Cheers
Nick
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