This problem is addressed in ArcGIS 8.1 Service Pack 1. See the Related Information section to download this pack.
When writing custom code that applies the ITopologicalOperator methods, ensure that the geometry parameters passed in are either polygons, polylines, multipoints, or envelopes.
Any type of SEGMENT geometry is not legal for these methods and may result in fatal errors.
Invalid geometry arguments were passed to the intersect method by the client.