This article from November 20th has a nice critique on how Team Foundation Server and Team System are going on the advent of the VS2008 launch:
Microsoft has made a great start with Team Foundation Server, and it has every-ones attention in the Microsoft space.
The question is really how much momentum they can keep behind it. The lack of any integration tools with existing software project management / quality systems could well prove to be a problem in the long run.
Still, buying up other companies that make great tools like TFS Web Access is a good way to impress the customers.
If they could make it easier to install, backup and administrate, then that would also be a great step forward. TFS 2005 was frankly too scarey for any small project, and it seems TFS 2008 does in fact address these issues to an extent