Steps to duplicate: during initial set up of Log Reader:
1. Configure Server Components.
2. Error displays: Logon failure: the user has not been granted the requested logon type at this computer.
3. User is an administrative domain user who is assigned as a local administrator on the server.
The logged in user must have the privilege "Log on as a batch job".
Go to Control Panel | Local Security Settings | Local Policies | User Rights Assigment | Log on as a batch job | properties and add members.