TF400533: In order for this wizard to upgrade to the latest version of SQL Server Express, you will first need to install Service Pack 2 or newer, and then re-run this wizard. It is recommended that you run Microsoft Updates which will install the current service pack automatically (You may need to enable Microsoft Updates from the Windows control panel).

This error may occur when trying to install Visual Studio TFS 2012 RC2 on a windows server station that has already a SQL server installed.
One solution is to updrage the windows version.
The solution that I've choosed is to remove all SQL server instances on my server ( I work on a dev machine so uninstalling is not really a matter ).
The TFS installer will reinstall a fresh sql server.