Datadude requires a local instance of SQL Server to use to validate our project. We create transient (i.e. temporary) databases to support our projects. Don't confuse this with the SQL Scripts, however, the scripts are always the truth.
However, because we are using a private instance of SQL Server, we do create objects in that instance that mirror (for the most part) what's in your project files. This affects you if you want to use some of the more advanced features of SQL Server 2005. These features include Full-text Search and partitioning. My advice is to just use developer edition, but if you use SQL Express here's the considerations:
SQL Server Express included (but didn't automatically install) full-text search when it was first released. However, when SP1 of SQL Server 2005 came out, SQLExpress no longer includes full-text. You must download the SQL Server Express with Advanced Services edition to get full-text. See http://www.microsoft.com/sql/editions/express/default.mspx for more info on this. If you have applied SP1 of regular SQL Express, you will need to uninstall and download the SQL Express with Advanced Services SP1 package and make sure to select a custom installation and add full-text support. If you don't do this you won't be able to create full-text catalogs or indexes in your project. Don't forget to set the project property to enable full-text as well.
Partitioning is an Enterprise feature, and you can't create partition schemes or partition functions in SQL Express. Therefore you won't be able to create these in your project if you use SQL Express as your designdb instance.