Let’s leave the 2008 version of Team Server for a while and move back to TFS 2005. Some say TFS 2005 is one of the hardest tools to install, as it annoys you to death screaming “error” and asking for more information at installation. Well, here are the guidelines that you can follow to avoid going through all this trouble.

“This is only for New BOX and single server deployment
1. Install Microsoft Windows Server 2003 or 2003 R2 with SP2
-Install IIS from windows components. enable ASP.NET, do not enable FrontPage extensions.
2. Install MS SQL Server 2005 with all features.
-Make sure that all services in MS SQL server set to Start automatically.
3. Install Windows SharePoint service 2.0 with SP2
-DO not configure WSS and select farm installation type
4. Install MS SQL Server 2005 Service Pack 2
5. Install .NET Framework 2.0 Service pack 2
6. Create 2 accounts on server TFSSERVICE and TFSREPORTS (if you have a domain and using active directory then create these account in Active directory)
7. Now time to start installation of TFS. if you are using domain controller then login in as domain admin and not local admin.
8. Insert the TFS CD/DVD and start the installation.
-First it will check the server health and necessary components, its nothing but what we did in above steps, if everything is fine then it will ask for login for services , enter TFSSERVICE login details then report service login details, enter TFSREPORTS then SMTP ( you can skip this for now)
-Start installation
-Finish installation
9. Install Team Explorer.
10. If you want to access TFS in Internet Explorer then download Team System Web Access Tool from Microsoft downloads site free of cost and install it, (chose different web site normally port 8090 or any other port and not default 8080)
11. Install Team Foundation Server 2005 Service Pack 1
12. Done !!! your server is ready to use.
DO Read TFS Installation guide (which comes in DVD or you can download new version from Microsoft web site) carefully before starting installation.”
From here