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As an addendum to the previous post:
-We are using the Oracle instant client from a .NET 4.0 application.
-In the connectionstring we set the provider to MSDAORA.
-This worked fine in XP, Vista and 7.
The error seems to be occurring before a connection is even made; entering a bogus host or username produces this error instantly.
We are aware of newer drivers/providers but these seem to have their own quirks (carriage return in queries causes errors, seriously??), while MSDAORA has always served us well until we encountered this problem.