I have recently had the need to work with SQL Server 2008 installed on Windows Server 2008. Since both of these products are in Beta (one more "beta" than the other!), this can really be a challenge.
One of the first things I noticed after installing Katmai (CTP4 - the July CTP) on Longhorn (RC0++) was that you could not connect to SQL Server, even though the installation completed without error. When you attempt, the following happens:
Digging into the error generated, the following TDS error is thrown:
After some digging around, I found the answer to this problem. It just so happens that the version of SqlClient is hosed on the default install of WS08/Katmai and you have to fix it. You do so by installing Visual Studio 2008 "Orcas" Beta 2!
There's a nice post on the Katmai forum that details what does and does not work together with Katmai: