This problem will be found in Windows Sharepoint Services v3 or Microsoft Office Sharepoint Services 2007.

It is occur when you delete user from your site and the user is author of the site or other sharepoint’s object such as list, document library, item etc.

Why? Because sharepoint will throw an error exception at particular action when those situation above exist.

I have been experienced this on Report Center in Sharepoint Collaboration Site.
The root site belongs to the author and it was deleted. I cannot view the reporting services file (rdl) from report library. It is always throwing SPException: User cannot be found.

I can solved the problem by change author of root site to the current site collection administrator, but I am sure you can change it to any user that exist on people and groups setting at your sharepoint site.

But be caution, because this solution does not always success.

So be careful if you want to delete some user from people and groups, make sure that user never become author of the object on your sharepoint site.