I upgraded my Visual Studio 2008 installation the other day to SP1 and everything went beautifully.  One of the issues that Microsoft fixed centered around the naming of embedded binary resource files.

Traditionally, binary resource files have an extension of .resources.  However, when VS2008 was introduced, it came with a bug that forced you to tack on a second extension: fileName.resources.resources.

Apparently, this is now fixed, but I did have to go back and rename my files accordingly.