Ok like promised here are a few thing to do in order to successfully create a Single Server install of Team Foundation Server B3.
Follow the documentation available on the DVD and also available here it has been greatly updated since the last release and has some good information.
What I used to do was to create a Virtual Machine with Windows 2003 Server SP1 (apply Windows Update) and then promote to a DC. Install IIS, then install SQL Server 2005, Windows Sharepoint Services and Finally the ATDT setup from TFS.
This worked fine up to B2. Enter SQL Server 2005 June CTP...
Starting with that release of SQL, you can't install SQL after you promoted your machine to a DC, the setup fails because it can't create a local group. So what you need to do is install Windows 2003 Server SP1 with patches then IIS and SQL Server 2005. When that is done, you then promote to a DC. Once that is done, reporting services will not work anymore, you'll need to give the NETWORK SERVICE user access to Read and Write everything under the windows\microsoft.net\Framework\2.0.x directory as well as Windows\temp. Note: I think this may be a limitation of SQL Server 2005 (pre-RTM) hopefully they will fix this for RTM.
The rest of the install should go smoothly from there.
Oh something we coun't do before B3, you can also decide to run in a workgroup environment and not promote you Single Server to a DC. I have tested this scenario and it works fine also. That would alleviate those problems for testing machines.
Components to use Visual Studio Team Suite RC, SQL Server 2005 September CTP, and the newly release VSTF B3 all available on MSDN and supporting version 2.0.5027.26 of the .NET Framework 2.0
Don't forget to give as much memory as possible to your VM or physical Server when running TFS as a Single Server.
Release of Visual Studio 2005 and the .NET framework 2.0 will finally stabilize the madness of .Net framework mixing and matching all future Beta product should be recompile with the RTM Framework bits and we'll only have to deal with the actual beta products and not the Framework.... I'm highly anticipating that moment... November 7th can come fast enough!
That's all for now,
Update: Vurg says that he was able to install on a promoted DC. The way I usually install is on a new VM in which I use a Windows 2003 Server SP1 slipstreamed install cd. I then Promote to a DC, Install IIS and then Run the SQL Server 2005 install CD. I use all the defaults in the SQL Setup exept for the User ID that will run the services. As per the TFS installation guide I Use the built-in System account and from the list select Local system I'm wondering if I used a domain user/administrator if that would let me install properly. I have not had any success installing SQL Server on a DC using the above mentionned user id. Next time I install I'll try with a domain admin and see if it works. I'll let you know.