Unable to set DEFAULT PRINTER in window that alert error 0x00000709?

This error is related to the old printer you have set as default before. Printers name that was recorded in your registry are priority on the system which you cannot modify if you're trying to set a new default printer. So you have to manually modify the registry. Note that the registry section is very sensitive,  serious  problems might occur if you modify the registry incorrectly.  Therefore, make sure that you follow these steps carefully.  For insurance included, move down the registry before you alter it. And that point, you can restore the registry if an issue happens. For Additional data about how to go down and restore the registry, click the accompanying article number to view the article in the Microsoft Knowledge Base:
How to back up and restore the registry in Windows: (http://support.microsoft.com/kb/322756/)

Now, here's how to troubleshoot:

1. Click the Start button and type "regedit", then right click and "run as administrator"
2. Now go to this location:

HKEY_CURRENT_USER\Software\Microsoft\Windows NT\CurrentVersion\Window
3. Located in the right column, you can change the device key value data to your printer name.Right click on the Device key then modify the data value (e.g. "HP Laserjet P1006,winspool,Ne03:")
Note: You MIGHT encounter this "Error Editing Value" which you are unable to modify the data,

All you have to do is to set "permissions" to the key, and this is how its done:

Right Click on the "Windows" key and choose "Permissions", check "Allow" -> Apply, then OK.