I had a chance to set up the VSTS 2008.
All I can share is that you need to follow the steps as outlined in this link
1. Ensure you meet all the pre-requisites
2. Ensure you follow the step-by-step guide to the letter
3. Enjoy the power of VSTS.
I love the Team Foundation Build, it makes automation of buids so basic. You have to try this!
Julius