When analyzing the DSA log there are entries like:
9/14/2009 5:42:50 PM (GMT-06:00) Common ldap_init( SERVERNAME , 389 ) ...
9/14/2009 5:42:50 PM (GMT-06:00) Common ldap_connect( ldap , NULL ) ...
9/14/2009 5:42:50 PM (GMT-06:00) Common Binding to as user domain\username
9/14/2009 5:42:50 PM (GMT-06:00) Common Error 0xe100002d. Failed to bind to SERVERNAME (dn=) as user domain\username with 4230 authentication type.
LDAP error 0x31. Invalid Credentials (8009030C: LdapErr: DSID-0C090540, comment: AcceptSecurityContext error, data 52e, vece).
9/14/2009 5:42:50 PM (GMT-06:00) Common ldap_init( SERVERNAME , 389 ) ...
9/14/2009 5:42:50 PM (GMT-06:00) Common ldap_connect( ldap , NULL ) ...
ADAM project can be opened via ADAM ADSI Edit, Project wizard finishes without issues
In this case the password for ADAM account has been changed in the past. Changing the password back and re-typing it in the GUI resolved the problem and dirsync started working.