Good article Steve. I disagree with the statement that MSDE and now SQL Express is not a production system. I always classified MSDE as a big version of Access. I see vendor product after vendor product ship with it due to the licensing being so generous. The products typically just use it as a configuration database vs and INI file since they're a bit more complex. Alteris for example stores what computers need to be scanned in MSDE and in my huge environment is only 50 MB. In these cases it fits great for people that don't need an Enterprise database but need something. Is it just me or has Access bit the dust in these cases in replacement for this?
It also does make an excellent learning system like you said for attaching Visual Studio to and whipping out a new app for a prototype.