MS has posted an add-in for VS.Net which will allow you to package MSDE into setup & deployment projects, it appears. Here's the info on it:

Microsoft SQL Server 2000 Desktop Engine (MSDE 2000) Deployment Toolkit (Release Candidate)

The MSDE 2000 Deployment Toolkit (release candidate) is a plug-in to Microsoft Visual Studio that automates the process of creating an integrated package with both the application and the MSDE database.

Source: http://www.microsoft.com/downloads/details.aspx?familyid=6e9a7403-c4ba-4d98-bb0b-2c9d6414071f