For those of you who install Visual Studio 2005 and the Windows Mobile 5.0 SDK, everything should be fine and dandy. If you have Internet Explorer 7 installed (whether in Vista or as the beta on Windows XP), you'll notice that you can't really create a project using the New Project Wizard (by selecting Visual C++ -> Smart Device -> Win32 Smart Device Project). All the information you'll receive from Visual Studio 2005 is a simple "Creating Project <Project> Failed..." in the status bar. Helpful isn't it? Well thankfully Visual Studio for Devices blog has the answer.

All you have to do is add a registry key to allow the wizard to open an internet explorer window.

Open the following registry key:

Windows XP x64 or Vista 64-bit:
HKEY_LOCAL_MACHINE\SOFTWARE\Wow6432Node\Microsoft\Windows\CurrentVersion\Ext\PreApproved
Windows XP or Vista:
HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows\CurrentVersion\Ext\PreApproved

And add the following Key

{D245F352-3F45-4516-B1E6-04608DA126CC}

Retry creating the new project and everything should be fine!