This issue has already been posted here along with the fix, but I figured I would pass along the information in case anyone hasn’t seen this. I posted a tweet about it today that drew some attention, so apparently not everyone is aware of this issue.
There is a site template included in the Fabulous 40 site templates from Microsoft that interferes with Project Server 2007. When you install Project Server 2007, it creates a site template that is used for your Project Workspace sites. It includes some integration between your Projects and your SharePoint sites. However, when you deploy the Project Tracking Workspace included with the Fabulous 40, it overwrites the Site Template, so that when you create a new Project Workspace with Project Server, it uses this Fabulous 40 site template instead. As I’m sure you’ve guessed, this site template does NOT include the integration with Project Server.
So, if you plan on using Project Server as well as the Fabulous 40 templates, make sure you turn them into the Fabulous 39 first and leave out the Project Tracking Workspace.