I'm blogging this in the hope that it might help someone else who's struggling with an install...
I had my laptop rebuilt last Friday, so I've spent the last two days at InstallFest :-) (I would have done most of my installing over the weekend but due to a slight oversight IT forgot to make my account an Administrator so all I could was download installers).
I started installing SQL Server 2008 Developer last night at home, but hit a problem with it. I tried again and got the same error, the exact text of which I'm repeating here in case someone Googles for it:
"Wait on the Database Engine recovery handle failed"
I put it down to a flaky connection to our VPN (a reasonable guess since our VPN has been playing up for me for a few weeks, although I think me and IT solved this between us this afternoon), so I tried again this morning in the office. Same result.
I Googled the error and found KB960781 which has the exact error message, but applies to upgrading SQL to SQL 2008 where the sa account has been renamed. As I was doing a clean install, this wasn't likely to be my culprit.
However, my fourth install attempt succeeded! What changed? I'd been configuring the SQL services to run under the Network Service account, but for this install I changed the account to the local System account. I'm guessing I could now change this back to Network Service, but I'd rather not chance it. What was the underlying issue? Frankly, I've no idea - my working theory is that there are some permissions missing from my Network Service account.