I had a similar issue which came up after I had reset my PDA. It appears a number of notebook files were still maintained in the OneNote cache folder located at

C:\Documents and Settings\_YOUR USER NAME_\Local Settings\Application Data\Microsoft\OneNote\12.0

I moved all my working notebook files out of their regular My Documents folder to start with a clean slate.

By deleting all of those files manually, the sync was able to re-establish itself. The path can also be found in OneNote 2007 by going to Tools > Options > Save and looking at the "Cache file location" directory.