DUMP TRANsaction is not allowed while the select into/bulk copy option is enabled or if a non-logged operation has occurred: use DUMP DATABASE, or disable the option with sp_dboption.
This error occurs when you perform a non-logged operation on a database, such as bcp or SELECT INTO, followed by a DUMP TRANSACTION to a dump device. Because there is data in your database that has not been logged and the log therefore cannot be used to properly recover the database, the DUMP TRANSACTION operation is not allowed. For example, if a user executes a SELECT INTO followed by an UPDATE statement, the SELECT INTO operation is not logged, and the UPDATE results cannot be recovered from the log.
Note that simply enabling the select into/bulkcopy option does not, in itself, cause this condition. The option must be set and a non-logged operation executed before this error message is reported.
Dumping the database creates a new savepoint on which subsequent transaction logs are based. Therefore, dumping the database ensures that the non-logged changes are recoverable and dumping the transaction log to a device is once again allowed.
You must perform a DUMP DATABASE. Disabling the select into/bulkcopy option using sp_dboption will not allow you to dump the log (even though the message says this is an option). To clear the 4207 error condition, you must dump the database.
You might need to use DUMP TRANSACTION WITH TRUNCATE_ONLY until you can perform a full database dump. If you must do this, you lose the ability to recover up-to-the-minute data changes in case of a media failure.