For the last couple of years I circled around to come be very focused on BizTalk again, and while not sure I have seen this error before back in the day or not, it seemed new to me.
Searching for the error online did not yield any results, other than unrelated posts. Seems there is an issue when integrating with Web Services that will cause this error message as well, but that wasn't my case. I am integrating PeopleSoft 9.2 Integration Broker HTTP to FlexNet MES using MSMQ. No web services involved.
Turns out the issue was the FlexNet schema root node has periods on its name, and BizTalk do not like that a bit. When trying to create .NET types behind the scenes it cannot deal with the periods.
The fix is to change the RootNode TypeName property of the rootnode. Visual Studio will default that property to the Root Node name. If we change the periods to underscores, or otherwise remove them, BizTalk can now create .NET types and the issue goes away.