Problem: "The list cannot be displayed in Datasheet view for one or more of the following reasons" error
This errror happened on Windows XP 32bit and IE8 with Office 2003.
Microsoft claims that it should run on 64-bit Windows with Office 2010 in order to function fine.
Source of the problem was installation of Visio 2010 and Project 2007 alongside with Office 2003.
Once both the Visio and Project were removed, page could display Datasheet view.