IDENTITY_INSERT seems stuck
Is it possible you have two tables with the same name in different schemas? Some random doc I found online states that message 8107 appears when you already have IDENTITY_INSERT set to ON for another table in the db...

Another debugging step to check: You state that the issue keep occurring even after you drop and recreate the table, but what if you drop and don't recreate the table, and try to enable IDENTITY_INSERT on another table? What happens then?