To install SQL Server 2008 on a Windows Server 2008 R2 you need a slipstream version of SQL Server 2008 with integrated Servicepack 1. At the moment you can’t download SQL Server 2008 with integrated SP1, so you have to create your own slipstream version.

1. Copy your original SQL Server 2008 source media to c:\SQLServer2008_FullSP1

2. Download Service Pack 1 from http://www.microsoft.com/downloads/details.aspx?FamilyID=66ab3dbb-bf3e-4f46-9559-ccc6a4f9dc19. The three architectures of Service Pack 1 should be included, the package names are as follows:

• SQLServer2008SP1-KB968369-IA64-ENU.exe
• SQLServer2008SP1-KB968369-x64-ENU.exe
• SQLServer2008SP1-KB968369-x86-ENU.exe

3. Extract the packages as follows:

• SQLServer2008SP1-KB968369-IA64-ENU.exe /x:c:\SQLServer2008_FullSP1\PCU
• SQLServer2008SP1-KB968369-x64-ENU.exe /x:c:\SQLServer2008_FullSP1\PCU
• SQLServer2008SP1-KB968369-x86-ENU.exe /x:c:\SQLServer2008_FullSP1\PCU

4. Copy Setup.exe and Setup.rll from the PCU extracted location to original source media location

• robocopy C:\SQLServer2008_FullSP1\PCU c:\SQLServer2008_FullSP1 Setup.exe
• robocopy C:\SQLServer2008_FullSP1\PCU c:\SQLServer2008_FullSP1 Setup.rll

5. Copy all files not the folders, except the Microsoft.SQL.Chainer.PackageData.dll, in c:\SQLServer2008_FullSP1\PCU\<architecture> to C:\SQLServer2008_FullSP1 \<architecture> to update the original files.

• robocopy C:\SQLServer2008_FullSP1\pcu\x86 C:\SQLServer2008_FullSP1\x86 /XF Microsoft.SQL.Chainer.PackageData.dll
• robocopy C:\SQLServer2008_FullSP1\pcu\x64 C:\SQLServer2008_FullSP1\x64 /XF Microsoft.SQL.Chainer.PackageData.dll
• robocopy C:\SQLServer2008_FullSP1\pcu\ia64 C:\SQLServer2008_FullSP1\ia64 /XF Microsoft.SQL.Chainer.PackageData.dll

6. Determine if you have a defaultsetup.ini at the following locations:

• C:\SQLServer2008_FullSP1\x86
• C:\SQLServer2008_FullSP1\x64
• C:\SQLServer2008_FullSP1\ia64

If you have a defaultsetup.ini, add PCUSOURCE=”{Full path}\PCU”.

NOTE: The {Full path} needs to be the absolute path to the PCU folder. If you will just be running from local folder it would be C:\SQLServer2008_FullSP1. If you will eventually share this folder out, {Full path} would be \\MyServer\SQLServer2008_FullSP1.

See question #11 here if you would like to use a relative path.
;SQLSERVER2008 Configuration File

[SQLSERVER2008]

…

PCUSOURCE=”{Full path}\PCU”
If you do NOT have a defaultsetup.ini, create one with the following content:
;SQLSERVER2008 Configuration File

[SQLSERVER2008]

PCUSOURCE=”{full path}\PCU”
and copy to the following locations:

C:\SQLServer2008_FullSP1\x86

C:\SQLServer2008_FullSP1\x64

C:\SQLServer2008_FullSP1\ia64
This file will tell the setup program where to locate the SP1 source media that you extracted in step 3.
7. Now run setup.exe as you normally would.

More Information can be found on this msdn blog. Thanks to Peter Saddow.