Hi, thank you for your post into the forum.
How strange, SQL Error 4208 indicates that a log backup has been called but the database is using the SIMPLE recovery model, as per this MSDN article: http://msdn.microsoft.com/en-us/library/aa226364(SQL.80
However you can only set up log shipping if the source database is using the FULL recovery model.
Are you performing any maintenance tasks, for example index re-builds, where the database recovery model is being modified from FULL to SIMPLE. The index re-build takes place and on completion, the recovery model is switched back to using the FULL recovery model?
If the answer is yes, please consider modifing the job so that the database recovery model is switched from FULL to BULK-LOGGED, perform the maintenance task and then switch back to the FULL recovery model.
The above action action will prevent SQL Error 4208 from occurring and prevent a break in the transaction log backup chain.
I hope the above helps.