When you develop a report model project in SQL Server 2005 Business Intelligence Development Studio, the Isolation option in the Data Source Designer does not have any effect
Consider the following scenario in Microsoft SQL Server 2005 Reporting Services. You use SQL Server Business Intelligence Development Studio to create a report model project. In the report model project, you create a data source against a SQL Server 2005 database. The database has the ALLOW_SNAPSHOT_ISOLATION option enabled. You set the Isolation option to Snapshot in the Data Source Designer dialog box for the data source. In this scenario, when you use a report generated from this report model, you may find the Isolation option has no effect, neither does the Query timeout option.
For more details, please refer http://support.microsoft.com/?id=952112
