I get this error  occasionally, and the only way I can get to work again
is to reboot the server.

I tried many times, resetting the IIS server but no luck.

For me,...I cant even create  a list  out the Custom List Template.

I am still exploring it. I am following steps  given in SharePoint SDK itself.

Any help is appreciated.

Did you try this out?
http://support.microsoft.com/kb/823278

Also, try adding <identity impersonate=”true” /> to
the web.config.

In web.config of our site  is already given as <identity impersonate=”true” />

I tried to follow the example given SharePoint SDK for creating custom  list
definitions. but no luck as of now.

Did you create  the list  template as a custom  list definition or a save
list as template? If as a saved list template  did you create it in the
top level site  of a site collection and are you creating  the new site
which uses the list template in the same site collection? List
templates are .stp files stored in the list templates  gallery of a site.
If the stp file is stored in the top level site of a site collection it
will be available to any site in the site collection. But it would not
be available to another site collection unless you manually export it
and import it to the new collection.

I have created  a custom  list, not a saved template(.stp).

I tried to follow the example given SharePoint SDK for creating  custom list
definitions. but no luck as of now.