Well that was lucky.  I was just about to create a new project in the team Foundation server and I noticed this blog posting.  http://blogs.msdn.com/ejarvi/archive/2005/09/27/474483.aspx

As he says he cannot comment if this will still be the case when the product ships proper but I'm glad I saw it as it warns that even if you are a member of the administrators group on foundation server because a project has to create a sharepoint site and a reporting services site it will error when trying to create a new project.

Here goes then.  What the blog above doesn't tell you is how to actually do all of this stuff.  Make sure you are logged in with admin privelledges and browse to http://LocalHost.
Then Site Settings >> Manage Users  Here we can add ourself to the admins group.
One thing I did notice is that the email was not set up as it didn't send alerts as I added users.
I havn't been able to set this up this far it still failed.  Never mind moving on.
Reporting services security on my box is at http://localhost/reports/Pages/Folder.aspx then go to Site Settings.  In there configure site wide security and add your account to admins role.
Hopefully that should be it now and I can create team Projects.....we shall see