<p>I've done this a <strong>million</strong> times ... setting up a developer work station.  </p>

<p>Is there a best practices, or installation checklist for installing Microsoft development software on a work station? What about applying updates and/or service packs?  Is there a specific order for doing this, in hopes of minimizing any install issues.</p>

<p>Our current software library consists of:</p>

<ul>
<li>Visual Studio 2003</li>
<li>Visual Studio 2008 </li>
<li>SQL Server 2005  </li>
<li>Microsoft Office 2007</li>
</ul>

<p>We do use some other tools, but I usually hold off on installing them once I get a <strong>good</strong> build from Microsoft ... whether a <strong>good</strong> build is possible or not is another topic! =)</p>

<p>Also, do you use any software like <a href="http://www.symantec.com/norton/ghost" rel="nofollow noreferrer">Ghost</a> to create images of work station?  Some easy way to restore your work station.</p>

I tend to go in chronological order. The oldest software to the most recent.
In your case I would do something like
Office 2007 (I usually install office first)
VS2003
Install VS2003 updates through Microsoft update
SQL Server 2005
Install SQL Server 2005 through Microsoft Update
And so on...
When the setup is over and the machine is configured I do a full base image with
Acronis True Image
.