My initial thought went to some sort of Kerberos issue, but everything checked out there. It turns out that the issue is with the actual installer in the fact that it will not try to impersonate on Windows 2008.
The resolution to the issue was to get the latest RS Add-in with the build of 9.00.3294. This allowed the RS Add-in to install successfully on Windows 2008.
It can be downloaded here:
Microsoft SQL Server 2005 Reporting Services Add-in for Microsoft SharePoint Technologies