If you don't have a correct server name or don't specify the correct port number you'll simply get:
So if you get this message and you know there's a "smith" in your AD somewhere then check that you have the correct server address specified in your Context.xml file. After I fixed up that issue I was puzzled by the strange behaviour that I was getting out of the control. After typing in a name and clicking the "check name" button the control would become disabled. The same would happen when I selected a person from the list.
I scratched my head and read over the instructions again. I noticed that one of the instructions mentioned that you should drag the group onto the design surface. Where I had been dragging the repeating field (Person) onto the designer. I should have been dragging the People group on.
I hope this post will save some you some time. Isn't that what it's all about?