VS 2005 SP 1 prevents insdevenv from working
To get insdevenv.bat working, you can either:
(a) uninstall Visual Studio 2005 SP1 (it was aimed at supporting Vista), or
(b) apply the hotfix available from Microsoft.
To get the hotfix, you must go through Microsoft support channels, via email, online requests, or phone. Because I don't have a Microsoft Live ID, I had to call Microsoft, and it took me about an hour to get the fix.
Here's a copy of the email I eventually got from Microsoft, complete with a link to download the hotfix. This link may expire, in which case, this forum post should be updated.
The hot fix for your issue has been packaged and placed on an HTTP site for you to download.
WARNING: This fix is not publicly available through the Microsoft website as it has not gone through full Microsoft regression testing. If you would like confirmation that this fix is designed to address your specific problem, or if you would like to confirm whether there are any special compatibility or installation issues associated with this fix, you are encouraged to speak to a Support Professional in Product Support Services.
The package is password protected so be sure to enter the appropriate password for each package. To ensure the right password is provided cut and paste the password from this mail.
NOTE: Passwords expire every 7 days so download the package within that period to insure you can extract the files. If you receive two passwords it means you are receiving the fix during a password change cycle. Use the second password if you download after the indicated password change date.
KB Article Number(s): 934517
Location: (http://hotfixv4.microsoft.com/Visual Studio 2005/sp1/vsuqfe4872/50727.870/free/308763_ENU_i386_zip.exe)
NOTE: Be sure to include all text between '(' and ')' when navigating to this hot fix location!