This is an interesting error. If you have confidence in the stream reach feature class and the Create Riparian Buffers is successful, then it may be something else.
Regards the spurious catchment created downstream of the pourpoint, these are not uncommon and can be deleted. They result from having elevation data beyond the watershed boundary and the StreamReach & Catchments tool trying to account for all flow. In many cases there may also be an associated spurious stream segment that is generated, especially if you use the PD method of flow modeling. In these cases both the spurious stream segments and catchments can be deleted. It is unlikely that this one catchment is causing your problem, but delete and try again.
I think the problem may have to do with your stream network and the riparian buffers. I would look at the stream reach fc and see if there any missing segments...those that may have been missed when assigning values to the stream type field of the PD or AreaThreshold network. The USLINKNO(1 | 2) may help, look at those with a -1 value, they are headwaters or stream initiation segments. Are there any out of place? Also examine any 0-length stream reach segments.
It may be helpful to look for riparian catchments that are very small. These may point to issues with the stream reach fc as well.
If you continue to have issues, let me know and we can pursue other avenues.