The Web Services Exceptions Console and Event Viewer logs, specifically the 'Dynamics' log is where I'd start first, as usually if there's nothing in either of those, it may not be an actual Web Services issue.
In regards to the tracing you mentioned, I think this may be it:
There is some tracing we can use to try and identify what is causing this to occur. To enable this tracing, we need to do the following:
1. On the Web Services server, browse to C:\Program Files\Microsoft Dynamics\GPWebServices\ServiceConfigs\ directory, make a backup of the DynamicsGP.config file.
2. Open the original DynamicsGP.config file and right after this section:
<system.diagnostics>
<switches>
<add name="ApplicationTraceSwitch" value="0"/>
</switches>
<trace autoflush="true" indentsize="4">
<listeners>
<add name="dynamicsListener"/>
</listeners>
</trace>
<sources>
<source name="System.ServiceModel" switchValue="" propagateActivity="true">
<!--Values can be:msdn.microsoft.com/.../ms733025.aspx -->
<listeners>
<add name="wcfListener"/>
</listeners>
</source>
<source name="System.IO.Log">
<listeners>
<add name="wcfListener"/>
</listeners>
</source>
<source name="System.Runtime.Serialization">
<listeners>
<add name="wcfListener"/>
</listeners>
</source>
<source name="System.IdentityModel">
<listeners>
<add name="wcfListener"/>
</listeners>
</source>
Add this section:
<source name="eConnectTraceSource" switchValue="Verbose">
<listeners>
<add name="eConnectXmlTracelistener">
<filter type="" />
</add>
<add name="eConnectTextTracelistener">
<filter type="" />
</add>
</listeners>
</source>
<source name="eConnectServiceTraceSource" switchValue="Verbose">
<listeners>
<add name="eConnectSvcTextTracelistener">
<filter type="" />
</add>
<add name="eConnectSvcXmlTracelistener">
<filter type="" />
</add>
</listeners>
</source>
This would come right before this section:
</sources>
<sharedListeners>
<add name="wcfListener" type="System.Diagnostics.XmlWriterTraceListener" initializeData="C:\Program Files\Microsoft Dynamics\GPWebServices\Logs\Tracing\GPWebServices.svclog"/>
<add name="dynamicsListener" type="System.Diagnostics.TextWriterTraceListener" initializeData="C:\Program Files\Microsoft Dynamics\GPWebServices\Logs\Tracing\GPWebServices.log"/>
</sharedListeners>
</system.diagnostics>
</configuration>
3. Right after this section in the same config file:
<sharedListeners>
<add name="wcfListener" type="System.Diagnostics.XmlWriterTraceListener" initializeData="C:\Program Files\Microsoft Dynamics\GPWebServices\Logs\Tracing\GPWebServices.svclog"/>
<add name="dynamicsListener" type="System.Diagnostics.TextWriterTraceListener" initializeData="C:\Program Files\Microsoft Dynamics\GPWebServices\Logs\Tracing\GPWebServices.log"/>
....and right before the end of the config file:
</sharedListeners>
</system.diagnostics>
</configuration>
Add this:
<add initializeData="C:\Program Files\Microsoft Dynamics\GPWebServices\Logs\Tracing\eConnectSvc.log" type="System.Diagnostics.TextWriterTraceListener, System, Version=2.0.0.0, Culture=neutral, PublicKeyToken=b77a5c561934e089"
name="eConnectSvcTextTracelistener">
<filter type="" />
</add>
<add initializeData="C:\Program Files\Microsoft Dynamics\GPWebServices\Logs\Tracing\eConnectSvcLog.xml" type="System.Diagnostics.XmlWriterTraceListener, System, Version=2.0.0.0, Culture=neutral, PublicKeyToken=b77a5c561934e089"
name="eConnectSvcXmlTracelistener">
<filter type="" />
</add>
<add initializeData="C:\Program Files\Microsoft Dynamics\GPWebServices\Logs\Tracing\eConnect.log" type="System.Diagnostics.TextWriterTraceListener, System, Version=2.0.0.0, Culture=neutral, PublicKeyToken=b77a5c561934e089"
name="eConnectTextTracelistener">
<filter type="" />
</add>
<add initializeData="C:\Program Files\Microsoft Dynamics\GPWebServices\Logs\Tracing\eConnectLog.xml" type="System.Diagnostics.XmlWriterTraceListener, System, Version=2.0.0.0, Culture=neutral, PublicKeyToken=b77a5c561934e089"
name="eConnectXmlTracelistener">
<filter type="" />
</add>
4. You’ll need to stop and restart the ‘Microsoft Dynamics GP Service Host’ service for changes to go through, and also the user account running this service must have ‘Full Control’ of the C:\Program Files\Microsoft Dynamics\GPWebServices\ folder.
5. Reproduce the issue with the Web Services then look for the files generated under the C:\Program Files\Microsoft Dynamics\GPWebServices\Logs\Tracing\ folder.
6. After troubleshooting, you can change the config file back to the way it was, so you don't bog down your system with ongoing logs, and restart the service again for changes to take effect.
Thanks