The output workspace does not support checkouts. Checkouts are supported in file, personal, and ArcSDE geodatabases that have a minimum release of ArcGIS 8.3.
Make sure you have specified the correct geodatabase and that it is either a personal, file, or ArcSDE geodatabase with a minimum release of ArcGIS 8.3. Upgrade the geodatabase to the latest version if necessary. For more information on checkout/check-in replication, see Replication Types.