Hi Erik,
I am using After Effects CS3 on Windows Vista. I had trouble importing two different psd files as compositions. No problem importing them as footage. One of them was a large file that I was using with a Classroom in a Book tutorial. It was working fine until I tried to import the rather larger .psd file as a composition. Then I got the 00:42 error message. I then tried to import another .psd file that contained a few layers in the same manner and the same error message came up. As I said, it works fine when I import a file as footage.
I hope this information helps you to answer my inquiry.
Thank you.
Abby