SQLExpress is definitely the easiest way to implement the ASP.NET 2.0 membership functionality as it will autocreate membership database for you unfortunately when installing Visual Studio 2005 Beta2 on all my computers the SQLExpress failed to install. 

After running the SQL Express setup manually i found out you can not install SQLExpress into a compressed directory! - Uncompressing the directory and rerunning setup did the trick - hope this helps somebody!

Chuck

PS If you want to run ASP.NET membership functionality with SQL 2005, follow the following steps (compliments ScottGu):

    1. Go to the \windows\microsoft.net\framework\v2.0.xxxx\ directory and run aspnet_regsql
    2. Point it at your SQL box and create a new database with the appropriate schema. The aspnet_regsql tool will walk you through via a GUI.
    3. Update your web.config file at either the system or local application level to point to the new SQL database.  This can be done by updating the <connectionStrings> section to have a “LocalSqlServer” setting that points to the database you want to use.  The default, out of the box, configuration that uses SQL Express looks like this:

     <connectionStrings>

        <clear />

        <add name="LocalSqlServer" connectionString="data source=.\SQLEXPRESS;Integrated Security=SSPI;AttachDBFilename=|DataDirectory|aspnetdb.mdf;User Instance=true" providerName="System.Data.SqlClient" />

    </connectionStrings>