TF26204 error when importing WorkItems in TFS08 SP1

Recently,
I have run into a problem while importing a workitem template from one TFS project to another. The error I got was slightly misleading at first:
TF26204: The account you have entered is not recognized. You do not persmission, please contact your TFS Administrator.

After, traditional WTF (mummbling) and Googling for an error I have narrow down the problem to the rules used on the template. This MSDN article was a big clue!

The Work Item template I was importing had rules with regards to user lists.
Specifically the original Project Template had a custom security group "Testers" and the WI template has rules specific to this group, in my case it was: , the new project was created with a different template and did not contain mentioned group.

At this point I had two options:
1. Modify WI template and remove all references to the non-existent security group. Good starting point is here or here.
2. Add the missing group to the TFS Project. From VS menu click Team Team Project Settings Group Memebership and click New.

I have choosen option 2. This error may also show up if you have custom lists that use "\" in this case I recomend to replace "\" with "" via option 1.