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If you are trying to create Test projects with the Visual Studion Team System 2005, and get the following error:

Then it most probably means that you have not installed the Team Foundation Client. Looks like this is a known issue with Beta 2. This may also occur if uninstallation of Beta 1 is not correct. You can try using the Beta 1 removal tool available for download at http://go.microsoft.com/fwlink/?linkid=47065.

Thanks to Hong Gao for the post that helped solve this problem.