We came across this issue on our project where the setup of some environments had been done incorrectly and we needed to reinstall Windows Sharepoint Services. Credit goes to my collegue Stephen Maitland who solved this but at present he doesnt blog so i offered to add this to help anyone else who has the same problem.
When reinstalling Sharepoint Services yo dont get presented with the option to choose a server farm installation type. This is because on the first installation you had selected "Default Installation" even though you uninstall it, you still dont get to change the installation type
The default installation of Sharepoint Team Services also installs the Microsoft SQL Server 2000 Desktop Engine (WMSDE), this is not removed when you uninstall. When trying to reinstall STS it detects WMSDE and automatically assumes that you want to do a Default Installation.
The solution is to remove WMSDE before you try to reinstall STS and the server farm option will "magically" reappear!
I have noticed a few sites that seem to copy the content of blog articles and display them in their own site. It is a bit annoying that they do not clearly reference or acknowledge the author so I have decided to put this note on the bottom of all of my posts from now so it is clear who wrote it.
This article was written by: Michael Stephenson
The source of this article is: http://www.geekswithblogs.net/michaelstephenson