Josh,
Created a new simple universe using a single connection and no parameters. Tried to create a report in webi from launchpad. Still getting the same error.
I am able to log in to Webi rich client 4.1 with windows AD authentication and create a report successfully. Saved it and ran it again successfully.
I changed my webi preferences in launchpad to Applet mode and tried running the report, which was a failure. Opened the newly created report and ran it in the applet mode which was also a failure.