From everything I've read as well as from the error message I received when I tried it myself, it's "strongly recommended" not to install TFS on a data-tier server in a two-tier installation when reporting services is already installed on the data-tier server. The TFS database and reporting services are incompatible. This is the most INCOMPETENT thing I've seen out of Microsoft in a long time.

I have no objections to installing reporting services on the application server and in fact have already done so initially thinking that would be good enough. However, our data server already has reporting services installed and in use for other applications. Yes, TFS developers there are "other applications" out there, and guess what, they are compatible with reporting services and don't even require a virtual server to be so. The server in question is brand new, 64-bit, and its RAID-5 array will be the only place we will put our code archives IF we use TFS. Apparently that will not be anytime soon.

Even more pathetic and completely irresponsible are the Microsoft responses to this issue in other posts on this forum which actually recommend uninstalling RS and all associated reports, data sources, security and configuration information off of the data-tier server; installing TFS, and then re-installing reporting services and all of its associated reports, data sources, security, and configuration properties across multiple vertical applications. TFS WTF?