I've re-done the entire installation that leads to WSS 3.0 (using the Windows Internal Database) on Windows Server 2008 and now I think I know why it is more difficult to get things right than it was on Windows Server 2003.
Cause 1: Administrator
When you install Windows Server 2003 on a server you automatically use Administrator and give it a password. If you've done this before it will automatically be a strong password. You will then - equally automatically - use this "user" when you install the Application Server and Web Server roles AND when you then install WSS 3.0.
When you install Windows Server 2008 it requires you to create a new user (walshmi in my case) and doesn't even require a password to be defined for that. So it's not as obvious as with Windows Server 2003 that you should use Administrator for the following installations.
Cause 2: Choice of two users
The way to be prompted to give Administrator a password is to re-boot. You will then see a screen with both Administrator and (say) walsmi. A 50% chance of getting this bit right!
Later: Unfortunately if you have not bothered giving walshmi any password, the system re-boots (as walshmi) and doesn't show the option of Administrator or walshmi. Thus simply by not bothering to enter a password (and the installation routine says you don't need to!) all further installations you do (without accessing Control panel etc. and manually giving Administrator a password) are done under the insufficient authority of walshmi - something you only discover right at the end of the WSS 3.0 installation!
Best Practice therefore is to always to specify a password for the user you add when following the standard installation screens!
(After you use (Control Panel) / Administrative Tools / Computer Management / Local Users and groups (etc.) to specify password for both Administrator and walshmi, you still don't on re-boot get a screen offering you a choice of Administrator or walshmi. Instead the system assumes that you are logging in with walshmi and no password (which of course doesn't work).If you then go to the change users screen, you are offered TWO walshmi icons and one Administrator icon. I regard this as extremely messy, so I'm going to delete the VM I did when specifying walshmi with no password and start again from the beginning - this time with a password).
If you do select Administrator then you will be forced to give a password and if you have done this before it will be a strong one. There is however nothing at this stage demanding a strong password.
Once you have specified Administrator, you'll probably keep doing so for the further installations.
Cause 3: Small print warning of strong password
Before you install the Applications server there's a few lines in very small print saying what the three requirements are (Administrator has a strong password; network address; something I can't remember).
You still get this message if you already HAVE a strong password and a network address which is perhaps why it is in such small print. However that means that it's easy to miss if you don't.
It also doesn't say (I think - this is from memory) that you should be running under Administrator (!!) just that the Administrator account has to have a strong password. Not much use that strong password requirement if you are running under walshmi.
Cause 4: Poor Keyboard implementation
In order to make things easier for US users no doubt, there is no longer a step in the normal installation where you can specify which keyboard you are using.
At first sight it's odd that there still is a time-zone specification that is in your face when you do the installation, but then you realise that the US itself is in several time zones and you have your explanation.
Having no step in the normal installation for keyboards means that the US keyboard is ALWAYS installed. It also means that in order to add a different keyboard, the installer has to go to Control Panel; select Regional and Language options and then Keyboards and Languages. None of that is necessary in a Windows Server 2003 installation where the equivalent of the screen you then get is part of the standard installation - you don't have to go off and find it.
The annoying thing here is that it would have very simple for the Server guys to add a line to the "Provide Computer Information" section of the "Initial Configuration Tasks" screen through which amending the keyboard used would have been as simple (and "in your face") as amending the time zone.
But, No, for some reason, the server guys decided to ignore that fact that a good number of all non-US installations of a Operating System would use the US English version and make it unnecessarily difficult for them.
(Maybe they assumed that the people who knew enough to use the US English version of an OS would be able to work out how to change the keyboard, and they are probably right, but was it really necessary?)
Anyway, once I was aware of the points above, once again the installation of WSS 3.0 + SP1 (using Basic Installation) on a Windows Server 2008 was straightforward and after it finished the default page opened OK.