Okay, your problem was a plugin called "Require Post Icon for New Threads".
That was preventing new threads from being created as they didn't have an Icon.
I edited your plugin to add the bit in bold, which allows reported post threads to be created with no icon, and tested a report ok.
Code:
if ($type == 'thread' AND $post['iconid'] == 0 AND THIS_SCRIPT != 'report')
I have left it like this for now.