Just some info that reached me via email, but I think will be useful for everyone.

MSDE will not be supported on Vista. In most cases you can best migrate to SQL Express.

• Please upgrade your MSDE applications to SQL Server 2005 Express Edition (SQL Express) at the earliest opportunity, if Windows Vista compatibility is essential for their businesses.
• MSDE mainstream support (on Operating System releases before Windows Vista) will continue until April 8, 2008 (extended support until April 8, 2013).  Also, no new MSDE redistributions will allowed after June 30, 2007. As ISV, you can sign up for royalty-free redistribution rights for SQL Express.
• Like MSDE, SQL Express is free to download, deploy, and redistribute.  There are several significant benefits to upgrading MSDE applications to SQL Express. Benefits include increased maximum data base size of 4 GB, removal of the workload governor, a free, integrated management tool (SQL Server Management Studio Express), SQL Server 2005 Reporting Services and importantly serviceability with Windows update.
• Technical guidance and migration resources are available at www.microsoft.com/sql/express.

• Microsoft is working on a whitepaper which will clearly articulate when to use SQL Server Express and when to use SQL Server Everywhere.
• For now – SQL Express Everywhere is a lightweight in-proc database (a set of dlls that an ISV can embed in an application, <2MB in size). It provides the SQL programmability model (ado.net, oledb provider) and one can use SQL Server Management studio to administer. It is therefore ideal for single user desktop applications or mobile applications that need a local data store (up to 4GB in database size). 
• To keep its lightweight nature, some of the database features like stored procedures are not supported by SQL Server Everywhere. If the ISV needs a local datastore that needs these rich features, they should use SQL Express. 
• Here are some links for additional information:
  o www.microsoft.com/sql/everywhere (there is a brief comparison of express and everywhere here)
  o www.microsoft.com/sql/express