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Running sp_dropsubscription returns error msg 637 Cannot use SAVE TRANSACTION within a distributed transaction

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Greetings

I am hitting error ms 637 "Cannot use SAVE TRANSACTION within a distributed transaction" when I try to run sp_dropsubscription for a subscriber. When I run sp_dropsubscription using @subscriber= "all" I get msg 8526 "Cannot go remote while the session is enlisted in a distributed transaction that has an active savepoint". when I run dbcc opentran the REPL_DIST_OLD_LSN returns (305980:31746:3) and REPL_NONDIST_OLD_LSN returns (0:0:0).  Prior to this I stopped the logreader agent and ran sp_replcmds and sp_replflush successfully and closed the session.

  My environment is as follows: SQL 2008 R2 distributor, sql 2000 sp4 publisher and sql 2008 r2 subscribers.  We are using DTC for one of the procedure in the publisher database. This procedure was recently updated to use BEGIN DISTRIBUTED TRANSACTION as the subscriber was recently upgraded from SQL 2000 to SQL 2008 and this was required. I have tried setting remote proc trans from 1 to 0 on the publisher but still get the error. any one know what is going on here?

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