This is currently a known issue. The Reporting install will roll back when installed in a disjointed namespace.
The symptoms can be the same as those for http://support.microsoft.com/?kbid=936219 (Error message when you try to install System Center Operations Manager 2007 Reporting: "The wizard was interrupted before Operations Manager 2007 could be installed") so there is the possibility that you installed Operations Manager 2007 with the SDK configured as local system and see the timeout issue here, then workaround the problem using the KB article 936220 referred to from 936219, but still fail to install reporting due to the problem below:
Viewing the MOMReportingN.log in the installing users %TEMP% folder you should likely find the following is searched:
Property(S): UnableToGetUserNameFromManagementServerActionAccount = SetPropertiesToManagementServerActionAndSDKAccountCA error: System.DirectoryServices.ActiveDirectory.ActiveDirectoryObjectNotFoundException : The specified domain does not exist or cannot be contacted.Property(S): UnableToGetUserNameFromManagementServerSDKAccount = SetPropertiesToManagementServerActionAndSDKAccountCA error: System.DirectoryServices.ActiveDirectory.ActiveDirectoryObjectNotFoundException : The specified domain does not exist or cannot be contacted.MSI (s) (F4:E0) [17:51:21:688]: MainEngineThread is returning 1603
If you are experiencing this problem, a hotfix is being worked upon for both Operations Manager 2007 and Essentials 2007. The hotfix will also incorporate a fix for the issue in http://support.microsoft.com/?kbid=936219
I'll blog the details when the fix is ready for release, which shouldn't be too long from now.