Mysterious merge replication problems creating a subscription
I think you should check that in your database you have some ddl trigger which can switch off 'ANSI_PADDING'. If in the trigger body you will find something
like i.e. SETANSI_NULLS OFF it could be your error.

If it is i.e. trigger which is monitoring that users are removing or adding i.e. indices.
That will be possible it is acting when you creating your pull subscription and replication internals are trying to add replication triggers on your subscriber database.

In this case you need to disable trigger, create pull subscription and enable trigger.

More you can find on this link. It is a bug in ms sql server 2005

http://connect.microsoft.com/SQLServer/feedback/details/334194/ansi-padding-options-in-replication-snapshot

J