The following error was found in the installer.log during repository configuration.
Wed Jul 11 07:45:57 2012: EXCEPTION
Message(SCException): "Failed to execute operation return code = -40000 on host cbnewdba3 instance <Server\Instance> database user sqldba"
Message(User): "An internal issue has occurred.
Please retry the last operation to continue the installation process.
If this attempt also fails, please contact Quest Support."
utils.exceptions.SCException: Failed to execute operation return code = -40000 on host cbnewdba3 instance <Server\Instance> database user sqldba
Middleware version is at 7.0.310 while Collector version is at 7.0.4(x). So the root problem was Middleware version not being at the current version.
Upgrade the middleware and perform the Repository configuration again. It is advisable to use the same PA agent version for the middleware and collector hosts.