unfortunatly it turns out the latest version of Magento (1.4.1.0) breaks API. There is an bug issue logged on Magento #23463, you quite welcome to contribute to that bug report.
http://www.magentocommerce.com/bug-trac ... issue=9392
We cannot do anything about it because it is issue in magento core libraries. The only suggestion I can come up with is to revert to the previouse version or get Magento technical support (if you have a support account with them) to fix the issue on their side.
