pagebreak is a variable, and Crystal doesn't like to group on a variable, as it's value is indeterminate prior to report being displayed...another way of putting it is, Crystal can't do a sort of the data prior to display.
If you get the data from a stored proc, you might be able to add a column that has the values that you want, and then Crystal can group on it...
I guess another way of stating how to get around this error is that Crystal only groups on fields in the database. You can construct a formula that uses fields from the database and Crystal will be happy to group on them (I do this all the time) but make it a variable, and Crystal is not happy.
HTH