That message is issued by bind when a client attempts to update it's hostname/ip entry under a DDNS implementation, but the server says no you are not allowed to do this. SME isn't setup with DDNS -- each IP lease is hard coded to a PC number (e.g., hostname xxx.xxx.xxx.101 = PC-00101) . See /home/dns/var/named/db.yourdomain.
Have you messed with Bind or DHCP at all?
Greg Zartman