ERRMSG: This server version is not supported. You must have Microsoft SQL Server 2005 Beta 2 or later.

This is a known issue with Visual Studio 2005 and SQL 2008 connectivity.
To resolve this please install this Microsoft HotFix on the Visual Studio workstation:
http://www.microsoft.com/downloads/details.aspx?FamilyID=e1109aef-1aa2-408d-aa0f-9df094f993bf&DisplayLang=en

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