It's a bit tricky to get Reporting Services (including the report server that comes with SQL Express with Advanced Services) to work on Windows Vista. The key is to turn on the right set of IIS components in the "Turn Windows features on or off" tool in the Vista control panel. Here is the list of required IIS features you need to add for Reporting Services to work:
Note that IIS7 in Vista Home Premium does not include Windows Authentication functionality so it will not work with SSRS.
You will get a compatibility message when you start to install SQL Server 2005. This is to let you know that you will need to install SQL Server 2005 Service Pack 2 after the installation finishes. You should also read Section 5.5 of the SQL Server 2005 Readme (Reporting Services Considerations for Windows Vista) for known issues and limitations.