I recently ran into the following error and though this resolution might help others. In my scenario the error propagation status waiting for initialization was being shown for one of the query servers in a MOSS farm. You could see this by looking in the search administration in central admin. If you looked into the ULS logs it says it is unable to find the GUID that is associated with the folder for the query server index location. The GUID was associated with the folder for the query server index location and it did exist and appeared to have the correct permissions configured. In our configuration we have two query servers and only one is dedicated for crawling. We went to the index server and tried to access the query server index location. That was when we noticed we could get to one folder but not the other by typing \\<servername>. The host file on the index server was being updated with the incorrect IP address for the dedicated WFE for crawling and therefore the index server could not propagate the content to the query server. To resolve it I updated the index for web front end to use all web front ends for crawling and then reconverted it back to a dedicated WFE and this seemed to resolve any confusion SharePoint had about entering in the incorrect IP.
A few good links which cover similar topics/situations are:
http://technet.microsoft.com/en-us/library/cc261810.aspx
http://sharepoint.microsoft.com/blogs/fromthefield/Lists/Posts/Post.aspx?ID=88
http://sharepointnotes.wordpress.com/2008/01/30/host-file-problems-when-using-dedicated-web-front-end-for-crawling/
Updated March 18th
Thought we fixed it but when I went in the next day the IP address reverted back! What we have done that is working was to switch the setting back to all WFEs for crawling and then manually updated the host file with the correct information by removing the reference for <IP for Query WFE 02> to <Server Name for Query WFE 01>. We left all of the references to the load balanced addresses of the web application pointing to the correct IP address and all seems to be working now with SharePoint using a dedicated WFE for crawling.