I was having the same problem and I finally figured out why and worked out a fix. If you house your iTunes Library on an external drive, read on.
I use a Time Capsule set up as an AirPort Base Station for wireless network & Internet access. I have an external drive connected to the Time Capsule's USB port. My iTunes folder and all it's contents are located on this external drive.
In a seperate but now related issue, when I upgraded from Snow Leopard to Lion, I started having Adobe Illustrator trouble, whereby every time I tried to Save a file to the network, Illustrator would hang mid-save then freeze my whole system. This thread in Apple Support Communities led me to the only found solution, which involves connecting to the Time Capsule using the SMB sharing protocol (LAN address smb://10.0.1.1) as opposed to Apple's default AFP sharing protocol.
So, I began connecting via SMB (smb://10.0.1.1 in my Connect to Server menu) to curb the Illustrator Saving Issue. Meanwhile, I set up my iTunes library, directing my iTunes Media Folder Location in Preferences to a folder on the external drive. All was going well until one day I connected to the Time Capsule Sharepoint using the Time Capsule icon that showed up under "Shared" in my Finder sidebar, which by default uses the AFP sharing protocol (afp://Time_Capsule._afpovertcp._tcp.local OR afp://10.0.1.1). It was on this day that I received the error message that titles this discussion.
What I THINK I realized, is that if you house your iTunes Media Folder on an external HD, the sharing protocol used to connect to the Volume must remain consistent. Once I mounted the volume using the SMB address, the error message went away.
I now have the volume in my Login Items BOTH ways, which seems redundant, but everything works. If someone has a reason why this is a bad idea, let me know. I'm not sure of the advantages/disadvantages of AFP over SMB, but I guess I'm stuck connecting via SMB thanks to the Illustrator issue, and my iTunes setup.