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The dreaded "Error 2869" when using the Smart Client Software Factory (SCSF) might be a known one if you've already tried using the SCSF with Visual Studio 2008 (beta 2 or later).
A solution was found: you can edit the MSI installer with "Orca" as described here. However, I ran into the issue again when I tried the installation with the now-out-of-beta version of the Guidance Automation Extensions (Feb 2008).
When uninstalling the 1.0 release of GAX, and installing the May 2007 version, everything worked (after editing the MSI of course).
Appearantly, the p&p team will have to update the installer again, there must be a reference to the May 2007 version of GAX in there that causes the error to pop up again.