Windows 7 and SQL Server fail: Failed to generate a user instance of SQL Server due to a failure in starting the process for the user instance. The connection will be closed.

I was super stoked to get Visual Studio 2010 for my machine but had major issues installing Microsoft SQL Server 2008 R2 to go along with it. I ran through setup and had a successful install, but when I went to create a new local SQL Server database in Visual Studio, the following extremely annoying error message would occur: "Failed to generate a user instance of SQL Server due to a failure in starting the process for the user instance. The connection will be closed." [More]