VS2010 Beta 2 has support for SL3 development and includes SL3 SDK build 3.0.40818. There is a known issue installing VS2010 Beta 2 (and Web Developer Express 2010 Beta 2) on computers running SL3 SDK build 3.0.40624 that is installed with VS2008 and Expression Blend 3.
To fix the issue you need to uninstall SL3 SDK build 3.0.40624 from Add/Remove Programs and then install SL3 SDK build 3.0.40818 from http://go2.microsoft.com/fwlink/?LinkID=157102.
by xamlgeek
After trying to install Web Developer Express 2010 Beta 2 on a Windows 7 Ultimate machine for 3 hours (and still getting errors) I tried to install VS2010 Beta 2 with success. After that I was able to install Web Developer Express 2010 Beta 2.