In an aid to specifically resolve the issue http://support.microsoft.com/kb/937831/en-us (The installation of System Center Essentials 2007 fails during the Reporting part of Setup and the following information is logged: "The specified domain does not
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Read the complete post at http://blogs.technet.com/cliveeastwood/archive/2007/09/28/system-center-essentials-post-rtm-hotfix-rollup-released-to-the-web.aspx