Why does this SQL query fail

The query below is failing unexpectedly with an arithmatic overflow error.

select IsNull(t2.val, 5005)
from(

SELECT 336.6 as val UNION ALL 
SELECT NULL

) as t2

“Arithmetic overflow error converting int to data type numeric.”

Strangely if the query is modified to remove the NULL and replace it with the same value as in the null coalesce (5005), it runs without issue

select IsNull(t2.val, 5005)
from(

SELECT 336.6 as val UNION ALL 
SELECT 5005

) as t2

Also, omitting the SELECT NULL line entirely allows the query to run without issue

select IsNull(t2.val, 5005)
from(

SELECT 336.6 as val

) as t2

If the coalesce value in the IsNull function is changed to an integer which is small enough to convert to the decimal in the subquery without widening, the query runs

select IsNull(t2.val, 500)
from(

SELECT 336.6 as val UNION ALL
SELECT NULL

) as t2

Tested this in both SQL Server 2005 and SQL Server 2008.

Ordinarily combining integers with decimals is seamless and SQL Server will convert both the integer and the decimal into a decimal type large enough to accommodate both. But for some reason running a query where the cast occurrs from both the UNION and the IsNull, causes the cast to fail.

Does anyone know why this is?