I just spent a good part of my day trying to get the SharePoint 2007 Beta2 Configuration Wizard  to work and finally got past a very frustrating problem.  I continued to receive "Exception: System.InvalidOperationException: This access control list is not in canonical form and therefore cannot be modified" even after reading several blog entries and following the suggestions.  The most thorough entry I found was on Nerd Notes.net at http://www.nerdnotes.net/blog/PermaLink.aspx?guid=93c5d391-39aa-4905-be2e-c12233a9d929, but even after following the suggestions there, I still continued to get the error.

 

After looking through the log file that the configuration wizard produces I found that the last registry key that was attmpted to be accessed was at HKLM/SOFTWARE/Microsoft/Office Server.  I browsed to this key using RegEdit.exe, right clicked on it and selected Properties.  Just like in the Nerd Notes blow, I received a dialog stating that the Key's permissions were corrupt.  After clicking OK and then closing out of RegEdit, I re-ran the Configuration Wizard and it completed successfully!

 

I you are having similar problems but can't find the exact resolution, my recommendation would be to search through the log file that the configuration wizard produces for the last reference to a registry key.  Then use RegEdit to pull up the permissions on the key, and if you're lucky, you'll get an error message stating that the permissions are corrupt and you'll be able to click OK to resolve them.