There are some issues when using Visual Studio Tools for Office and .NET 2.0 at the same time. VSTO is very picky with respect to the runtime it uses. My recommendation would be to uninstall VS2005 or, to fire up a Virtual Machine (in Virtual PC, since you've got MSDN) and try installing just VS2003 and VSTO in it.
Picture a huge catholic cathedral. In it there's many people, including a gregorian monk choir. You know, those who sing beautifully. Then they start singing, in latin, as they always do: "Ad hominem..." -Jörgen Sigvardsson