This error occurred in SharePoint Designer 2010 when attempting to edit a masterpage.  Like many errors with SharePoint 2010, this is related to Alternate Access Mappings.  The server was being connected to by its short form url of http://site.  If connected via the long form, http://site.domain.extension, it would work with issue.

To permanently resolve the error, configure your alternate access mappings and make sure the long form url is listed as one of the public urls.