Tim,
There are a few different threads on this problem listed at the bottom.

The biggest issue is that no one truely knows what is causing it. I was able to find an article on novell (http://support.novell.com/cgi-bin/search/tidfinder.cgi?10019316) that suggests the problem is client 32 related. The article talks about the problem occuring when launching the .exe across the network. However, the app I am having trouble with has an .exe that resides locally on the workstations and only the data is accessed across the network. Currently I am working on updating the client 32 to see if that helps the problem. I am going to 3.2 client (which is 3.1 with patches as I understand it) and am playing with settings available such as "True Commit" and "Use Extended File Handles".

To further complicate the issue, and other UI user is getting this error on an NT server but only when accessing from an NT WS box. He has never seen it with Win9x boxes where I have only seen it with Win9x boxes.

Here are a few titles of other running threads
"Invalid Seek Offset - Network Timeout"
"Network Utilization, Invalid Seek Offset Error Reading File"
"More on Invalid Seek Offset"

PS - I'm theorizing that with my problem, "Error Reading File" is being caused by the same issue. I don't know what the issue is yet, but these two seem to show up together all the time.