No, it has nothing to do with fees. The input to the transaction was taken from previous unconfirmed transactions. The network couldn't verify the input as existing as it is unconfirmed so the transaction was rejected. The casino will have to update their routines to handle building transactions correctly.
That's great information. Do you know if something like that could happen if someone sent Bitcoins from the standard Bitcoin client with -paytxfee=0 ?
Without basing it in unconfirmed inputs:
As far as I know the wallet would keep on broadcasting the transaction and try to get it through (and you wouldn't see the Bitcoins in there as they are marked as reserved for transaction). So you would have to screw around the wallet a bit to get rid of that.
That's more of a guess than knowing though ^^
That raises another interesting question: how to make that broadcasting stop in case the sender realizes he has set the transaction fee too low and wants to correct it?