You may receive this error when re-installing MOSS after an upgrade from WSS 2.0 or SPS 2003:
The current installation mode does not support SKU to SKU upgrades because there exists an older version of Windows SharePoint Services that must be upgraded first.
After reviewing the log file, you may also see a message like this:
The setuptype is a sku2skuinplace upgrade and there exists a wssv2 connection string and not a wssv3 connection string. This means the server needs to be upgraded first and this should have never been a sku2sku upgrade
CAUSE: during the original installation, you chose to upgrade the server. By default, you must continue with the upgrade to install MOSS on this server.
SOLUTION: if your intent is to install a fresh copy of MOSS (no upgrade), modify the registry to tell SharePoint to use a clean install
1. Open registry (Start > Run > regedit.exe)
2. Browse to HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Shared Tools\Web Server Extensions\12.0\WSS
3. You will notice that the SetupType value is SKU2SKU_UPGRADE and the SetupTypeBackup will be V2V_GRADUAL_UPGRADE or V2V_INPLACE_UPGRADE
4. Modify the two string values to both be CLEAN_INSTALL
This will allow MOSS to install normally, unaffected by the WSS 2.0 or SPS 2003 environment.
This is NOT a recommended path for upgrade, but may be required as a sub-step in the following procedure: