Certain features of Microsoft SQL Server 2008 require Visual Studio 2008 SP1. If VS 2008 SP1 is not installed the SQL Server installation will abort with the following error message: "A previous release of Microsoft Visual Studio 2008 is installed on this computer. Upgrade Microsoft Visual Studio 2008 to the SP1 before installing SQL Server 2008."
PROBLEM: You've downloaded and installed Visual Studio 2008 SP1, yet SQL Server 2008 still fails to install with the same error message.
SOLUTION: If you installed a beta version of Visual Studio 2008 SP1 you must first uninstall it and then install the RTM version. You can use the Visual Studio 2008 Service Pack Preparation Tool to effectively remove prerelease versions of the service pack.
If you did not install prerelease versions of the service pack, yet still get this error message, chances are there is a Visual Studio SKU that did not have the service pack applied. For example, if you have both Visual Web Developer 2008 and Visual Studio 2008 Professional on your machine, you need to install both SP1 for the Professional version and SP1 for the Express SKU. In other words, installing the Visual Studio 2008 Professional Server Pack 1 does not apply the Service Pack to Visual Web Developer. Consequently, you cannot install SQL Server 2008 with those features that require VS 2008 SP1 until apply the service pack to the Express SKU. (You can alternatively uninstall Visual Web Developer and then re-download and re-install it, as the current download has SP1 baked into it.)
For more information on installing SQL Server 2008 and the service pack requirements, check out SQL Server 2008, Visual Studio 2008 SP1, and .NET Framework 3.5 SP1 Explained.
For more information on the new features in SP1 pertinent to ASP.NET, see the .NET Framework 3.5 Service Pack 1 Overview.