Back in June of this year I wrote the post explaining that SCVMM 2008 R2 can’t handle more than one dash in it’s hostname.
http://jeffwouters.nl/index.php/2011/06/virtual-machine-manager-cannot-process-the-request-because-an-error-occurred-while-authenticating-srv-scvmm-01-network-lan/
Take a look at this blog post from Krisna Ismayanto: http://wss-id.net/blogs/kud0s/archive/2011/09/14/vmm-naming-convention.aspx
So it seems this is an undocumented feature that will NOT be remove in it’s next release…since SCVMM 2012 Beta has the exact same problem!
http://jeffwouters.nl/index.php/2011/07/error-value-3-when-installing-scom-2007-r2-reporting-server-on-sql-2008-r2-sp1-on-windows-server-2008-r2-sp1/
I hope someone from Microsoft reads this post and that this issue will be resolved in a future release…