Hi Sotherls - Have you checked the disk space available on the drive that hosts the SQL Database? Could it be that you are running up against a DB size limitation (4gb for SQL Express 2005)?
THanks Greg. I got an email from support saying it was because of a full transaction log but still had the problem after shrinking. In any case I blew it away after I saw the email about the beta 2 version which has to have a clean install anyway.