This is new to me...
Apparently, you can't use Reporting Services to connect to an incorrectly matched SQL Database SKU: https://blogs.msdn.microsoft.com/psssql/2013/02/20/rs-database-engine-does-not-meet-edition-requirements/
If you try to, you get this lovely exception in SSRS:
The interesting thing is I got this exception trying to setup a SQL Express Reporting Service data source connecting to a Developer edition of the database server. I thought Express was free so why would they put restrictions on what database server it connects to?
Ahh well...time to install SSRS Developer edition I guess :-)