A new introduction to .NET 3.5 is the ability to limit the size of the incoming messages when using Web services. Apparently this is to help combat Denial of Service (DoS) attacks.
However, it is not clear how to change this setting, its simple when you know how. In you App.Config, or Web.Config you should have a Bindings section for each of web services references. Within this there are all sorts of useful settings, however by default the maximum message size is quite small, so to alter this you must change maxBufferSize and maxRecievedMessageSize. Now don't go crazy just up it to what you may need, this may be quite large if you are building all your internal applications through a web service layer.