I had an issue today where an outer apply on a table valued function kept giving me strange errors.  After wasting about 30 minutes trying to figure out what I had done wrong, I Googled it and found a few small passing references to the database setting (under properties - options) for compatability mode.  Sure enough, when I looked at the setting, it was set for SQL Server 2000 (80) and this is a 2005 database.  When the DBA upgraded our databases from 2000 to 2005, he "forgot" to change this.  I had him make the change and now the outer apply with a table function now works.