After a few attempts and much frustration, yes I can say that you CAN install Virtual Server 2005 R2 on Windows Vista B2.
I installed Vista Ultimate - July 2006 CTP
I went into gpEdit.msc and turned off UAP (User Account Protection) - I found a blog online that indicated that this could interfere with the setup of VS 2005, and I have tried the installation with it on and I ran into the blue screen of death a couple of times. After disabling UAP - I did not have this issue.
I found an excellent post on setting up IIS7/IIS6 Compatibility at http://www.pro-networks.org/forum/viewtopic.php?p=606840 - However, it did not address the fact that you need to turn on Windows and Integrated Authentication - and if you do not turn these on, VS 2005 will fail when you try to launch the admin console.
I found this blog too that was helpful regarding the credentials required to launch the admin console - http://blogs.msdn.com/virtual_pc_guy/archive/2006/07/24/675346.aspx
After a few tries - I'm happy to say this works great. Thank you all for the great posts.