After reinstalling Visual Studio 2003 (while I could try diagnosing
every single possibility, I just needed the machine up and running
as soon as possible), the problem persisted - "Could not create
automation server" whenever I added a project to a solution,
failing the operation. Somehow something was broken during the
process of uninstall a prior CTP of SQL Server 2005 (and the .NET
2.0 runtime), and installing the newer version.
In any case, I eventually tracked it down to the scripting engine
being broken, so I
downloaded the 5.6 scripting engine. Of course the MSI was
blissfully unaware, and thus belligerent towards, Windows Server
2003 (which I use as a development/test workstation), so I had to
run it in an XP compatibility mode, but that solved the problem.
This is entered in the archives just in case someone in the future
has this problem.