In the Exchangesetup.log and SBSSetup.log we got the following error:
[REQUIRED] A reboot from a previous installation is pending. Please restart the system and rerun setup.Based on some quick research, the general recommendation seems to be that you should reinstall SBS 2011 rather than trying to add Exchange 2010 after the fact. So, to recover, we restored the system state to the old SBS 2003 server (which we cleverly created just before starting the installation).
At this point, we figured that maybe there was something weird because we had selected to download and install updates as part of the install. So, for attempt number two we did not install the updates and got a different error about being unable to find a domain controller. This one turns out to be an error that can occur if you have restored system state on Windows 2003. Apparently the file replication service gets confused. And although the KB for the hotfix below appears completely unrelated it seemed to resolve the issue. See the following:
We think the problem was that DHCP was not configured on the source server. This client has an IP-based phone system that provides DHCP. This was configured by the phone provider to ensure that the necessary options are pushed out to the phones. When you configure the answer file for SBS 2011 installation there is a checkbox asking you to select whether DHCP is installed on the source server. However, the documentation explicitly states that DHCP must be installed and configured on the source server.
When DHCP was installed on the SBS 2003 server, it would not run because it conflicted with the DHCP on the phone system. So, finally, SBS 2003 and the new SBS 2011 were isolated off the main network. Then installation proceeded as normal.
Just for the record, my business partner Darrin is the one who finally figured this out.