As part of a workgroup install, TFS (specifically that TfsGssInit utility) attempts to create a group called "LicensedUsers" (with that SID) and then add you (whoever is doing the install) to it. Unfortunately, if there are any problems creating this group, the V1 code assumes the problem was with the group already existing (unfortunately it doesn't log the error that happens) and moves on to attempt to add a member to the group (hence the error you're seeing).
A little further up in the log should show how TfsGssInit was called (the full command line). Can you paste that? Can you try it yourself?
What user did you run the install as? Assuming it was a member of the Administrators group (was it a domain user?), you may want to try a different admin account as a data point.
Team Foundation Server - http://blogs.msdn.com/jmanning/ |