I thought I posted this last week, but I just found it sitting as a draft in Windows Live Writer.
Before you install Visual Studio 2005 SP1 Beta (Now Available: Visual Studio 2005 Service Pack 1 Beta), you must first uninstall Visual Studio 2005 Web Application Projects (if installed, of course). If you forget to do so, setup will remind you eventually. The message you receive should resemble the following:
It would be nice to know *how* to uninstall WAP in the first place. I installed SP1 beta and there was no message like you have posted.