There is no need to guess about the rootcause of the above error message, as it clearly mentions about compatibility issues as a warning! The above error was presented to me recently when I'm trying to install SQL Server 2005 & 2008 versions on my Windows 7 RC VM. The exclusive specificatin of this error is it included SQL Express editions too, as the incompatibility was fixed in SQL Server 2008 Service Pack1 and SQL Server 2005 Service Pack 3. Without further thinking I simply hit 'Run Program'...(
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Read the complete post at http://sqlserver-qa.net/blogs/tools/archive/2009/06/29/sql-server-version-has-a-known-compatibility-issues-with-windows-7-rc-this-warning-is-genuine-and-applies-to-all-sql-server-editions-including-all-express-editions.aspx