I installed Visual Studio code name Orcas Beta 1 on my Windows Server 2008 Beta 3 along with the SQL Server 2008 aka Katmai CTP June 2007 successfully.
This installation shows that SQL Server 2008 is working fine side by side with the SQL Server 2005. If you have read my previous post http://www.kodyaz.com/blogs/software_development_blog/archive/2007/06/08/562.aspx you will remember that I failed to install the June CTP of Katmai on a computer where SQL2k is running.
I wanted to make a try how I can connect to SQL Server 2008 within Orcas IDE. I placed a SqlDataSource on the web page. I added a new connection on the data source configuration wizard of the SqlDataSource. I could connect to the SQL Server 2008 June CTP installation successfully, listing installed databases within the instance. So test connection succeeded. But when I clicked the OK button after the test in order to finish the creation of the new connection, the following error message is displayed unfortunately.

Microsoft Visual Studio
This server version is not supported. Only servers up to Microsoft SQL Server 2005 are supported.
Although the error message says that the SQL server version is not supported, you will see that the connection string to the Katmai CTP version is successfully defined and listed in the connection string dropdown if you open the Configure Data Source wizard of the SqlDataSource object.
The connection string is as follows;
Provider=SQLOLEDB;Data Source=kodyaz\sql2008;Integrated Security=SSPI;Initial Catalog=master