Have you added your users to the three necessary places: The Team System project, the Project Portal and the Reporting Services? Like this:
(1) Add user to appropriate project:
(1.1) Right-click project (or root project for all projects)
(1.2) Select "Team Project Settings".
(1.3) Select "Group Membership".
(1.2) Selecting the group to which you want to assign the user.
(1.4) Click the "Properties" button.
(1.5) Select the "Windows User or Group" radiobutton.
(1.6) Clicking the "Add..." button.
(1.7) Selecting the required user(s) and confirm it all.
(2) Add user to Project Portal:
(2.1) Right-click project and select "Show Project Portal".
(2.2) Click "Site Settings"
(2.3) In the "Administration" section, click "Manage Users"
(2.4) Click "Add Users"
(2.5) Fill in the list of users and follow the instructions.
Note: User names include the domain, e.g DOMAINNAME\mwatson
(3) Add user to Reporting Services:
(3.1) Right-click project and select "Show Project Portal".
(3.2) Click "Reports".
(3.3) Click "Home".
(3.4) Click "Properties".
(3.5) Click "New Role Assignment"
(3.6) Add the new user(s), select their role(s) and click OK.
Note: User names include the domain, e.g DOMAINNAME\mwatson
ref: http://social.msdn.microsoft.com/Forums/en-US/tfsadmin/thread/ffb91587-87f9-4cf6-a1dd-f10a43486de9
