Problem updating 10.6.8 SWUpdate server to host Lion updates

My lion clients won't connect. I've followed all the steps in regards to changing the conf and plist (in both locations). SL client is fine but lion client errors and says the software update server is not responding and gives the option to open Network diagnostics.

Console gives the following (note i've replaced our server name with my.domain.com):

4/06/12 4:04:50.367 PM Software Update: SoftwareUpdate Scan: Error Domain=NSURLErrorDomain Code=-1102 "The operation couldn’t be completed. (NSURLErrorDomain error -1102.)" UserInfo=0x7fe9d2538550 {NSErrorFailingURLStringKey=http://my.domain.com:8088/index-lion-snowleopard-leopard.merged-1.sucatalog, PKURLErrorStatusCode=403, SUCatalogFetchOverrideURLString=http://my.domain.com:8088/index-lion-snowleopard-leopard.merged-1.sucatalog, PKURLErrorResponseHeaders=<CFBasicHash 0x7fe9d380cb30 [0x7fff75859fc0]>{type = immutable dict, count = 5,

entries =>

0 : Case Insensitive Key: Content-Type = <CFString 0x7fe9d380da80 [0x7fff75859fc0]>{contents = "text/html; charset=iso-8859-1"}

3 : Case Insensitive Key: Content-Length = <CFString 0x7fe9d3809a10 [0x7fff75859fc0]>{contents = "324"}

4 : Case Insensitive Key: Connection = <CFString 0x7fe9d380da60 [0x7fff75859fc0]>{contents = "close"}

5 : Case Insensitive Key: Server = <CFString 0x7fe9d380da10 [0x7fff75859fc0]>{contents = "Apache/2.2.17 (Unix)"}

6 : Case Insensitive Key: Date = <CFString 0x7fe9d380d9e0 [0x7fff75859fc0]>{contents = "Mon, 04 Jun 2012 06:04:50 GMT"}

}

}

EDIT: I also get both of these with the above error each time I launch Software Update:

4/06/12 4:15:12.702 PM com.apple.SecurityServer: Failed to authorize right 'system.install.app-store-software' by client '/System/Library/PrivateFrameworks/PackageKit.framework/Versions/A/Resources/in stalld' [410] for authorization created by '/System/Library/CoreServices/Software Update.app' [406]

4/06/12 4:15:12.702 PM com.apple.SecurityServer: Failed to authorize right 'system.install.software' by client '/System/Library/PrivateFrameworks/PackageKit.framework/Versions/A/Resources/in stalld' [410] for authorization created by '/System/Library/CoreServices/Software Update.app' [406]

Could there be a permission issue somewhere?

Message was edited by: jayjay3032 Additional info added

Because I'm not a fan of editing anything inside of /System/Library if at all possible, the better way IMHO is to put on schg flags on the swupd.confg and swupd.plist file, that way they can't be changed from restarting the service.