Break down the formula - put just mid({CalendarDropDates.DropDate}, 6, 2) on your report and see what the value is. Then add "ToNumber" to it and check the value again.
Is there any possibility that the field is blank or null? That might also be causing this error. You could try this:
if not IsNull({CalendarDropDates.DropDate}) and {CalendarDropDates.DropDate} <> "" then
Monthname(tonumber(mid({CalendarDropDates.DropDate},6,2)))
-Dell