Funnily enough, the Altiris Deployment Server 6.5 setup is able to determine that SQL is installed on a machine, and determine the instance name, but can't determine if the correct network connectivity is present for it to actually work.
So when going through the install you think all is well, until you get a "Setup was unable to run "DBinstaller.exe" to create the "express" database" and get told the installer will quit.
Rather cryptic... and it's because no network protocols are enabled by default in MSDE 2000 + SP4 installs (ie DISABLENETWORKPROTOCOLS=1 by default now). The way to fix the error is to go into %programfiles%\Microsoft SQL Server\80\Tools\Binn and run srvnetcn.exe. You'll see all network protocols disabled by default - just enable TCP/IP, restart the SQL Server service and then re-run the DS 6.5 install, and all actually will be well.