OK I think we've found the reason for the problem, so posting the investigation results here.

Essentially, the data is corrupted - there are a number of items that have multiple records for the same item and same location. An example in your database is for item 582; if you use Item Inquiry to look at the quantities on hand from the Quantities screen, you will see location 1 listed twice, once with quantity 0 and the other with 34,950.

The Item Valuation report uses the ICILOC (Quantity by Location) file so when it came across duplicated records, it gave an error. If you continued past this error, you would get it again and again for every item that has this data problem for the item. Eventually the report would print, but you might have to see this Temporary File error many many times until it does. During this time, the correct report workfile ICKC0002 is being built.

As it turns out, the data integrity check in Adagio Inventory was not finding these errors and it should have. Rebuild cannot fix these integrity errors.