As a follow up to my explication on the various TFS Editions and a few thread I saw on the Visual Studio Team System forums (including Upgrading TFS 2008 Workgroup to Std. Edition - then TF50626), I'd like to point out something about the upgrade from Workgroup Edition to Full Edition.
When you're running Workgroup Edition, users need to be added to the Team Foundation Licensed Users group in order to connect to the server. However, the Full Edition doesn't have this restriction and in fact doesn't use the Licensed Users group to limit server access. What confused folks it that the upgrade doesn't remove the group. In fact, due to the way our group membership logic was coded the group still has a maximum membership of 5 users!
The best way to make sure that your upgrade succeeded is to actually remove a user from the Licensed Users group, add that user to a different TFS security group, and make sure the user can still connect to the server. If that works, you should be able to just ignore the Licensed Users group.
I'll follow up with my team to see if we can get this group removed on upgrade to help avoid confusion in the future.