Just as a quick note – Windows Server 2008 RC0 seems to have the same setup issue as Windows Vista, or at least the x64 RC0 does – I spent most of the evening last night editing settings, rebooting, plugging in the product key, and reading “This computer’s hardware may not support booting to this disk. Ensure that the disk’s controller is enabled in the BIOS.” The problem is detailed at http://support.microsoft.com/kb/925481 for Vista. Windows Server 2008 RC1 fixes this issue.

I was having the problem on a Virtual system in VMWare ESX 3.5, so it was easy to disconnect a disk to get past the error, but downloading and installing the updated RC seemed like the better fix for the first DC in a new test lab.

What apparently is going on is if you have 2 hard drives that have never been partitioned or initialized, then the Setup.exe program gets confused. You can remove one of the disks temporarily, format them with another boot medium (BartPE, anyone?), or just not use Win2k8 RC0. According to the support note, the only fix for Vista is to format the drives.  I bet you can remove one of them and Vista will work, too, but haven’t tested.