How-To: Smart Client Software Factory (SCSF) and Visual Studio Orcas Beta 2
Spent a few minutes banging my head against the wall before I found this link How-To: Smart Client Software Factory (SCSF) & Visual Studio Orcas Beta 2. I wasn't getting the same error, but the VM I'm using does not have Visual Studio 2005 installed so I kept getting a Error Code 2869.
The gist is that the SCSF MSI has some references to Visual Studio 2005 (aka Visual Studio 8.0), which need to be edited to make it work with a Visual Studio 2008 Beta 2 only installation. Not exactly "intuitive"...hope they get this fixed in the near future.