You may be using an older version of the stack or the required patch never made it into the stack. I have to admit complete ignorance on the current status of the Axis stack/USB interaction. At one point it partially worked.
That error message creeps up when the stack sends packets to the USB shim in interrupt context. I wrote a patch at one point to fix it, search the mailing list. Sending on the serial port doesn't block so it is ok for serial modules. However the USB send routines may block, so you can't use them from interrupt context. My solution was to queue them at the stack layer and send them from a scheduler queue later.
I thought the stack incorporated that fix at one point?
BTW, has anyone tried the USB driver with the current CVS Axis stack? What is the current status: working, not working? Kernel mode, user mode stack? I just haven't had time to try it. Greg, have you tried it?