I haven't been able to get this to happen again since Scott offered the magical Christmas Egg to anyone who could reproduce it

But in my case, it was definitely something to do with text boxes overlapping other objects. The first time it happened when I tried to put a link/button after a paragraph. When I moved the link into place the argument warning popped up. (I tried making just the last few words in the paragraph a link, but VSD insisted on all or nothing, so I made the link text separate from the paragraph, used advanced text, and placed it at the end of the paragraph). Had to ctrl-alt-delete and start over again.
So I made an actual button, made sure it didn't overlap the paragraph text box. But in shifting things around, the button touched the top of an HTML box (a form) and that argument warning came up so fast I couldn't move it away from the box or move the box away from the button, just ctrl-alt-delete again.
I have not been able to make it happen again, even when typing right over another HTML object or across another text box. I'll get the latest VSD7 update sometime over the weekend and see what happens.
Do you have the latest updated version installed?