We use IS v12; I built a .prq file for the purpose (they don't supply a .prq for SQL 2008 for IS v12). First I went to http://msdn.microsoft.com/en-us/library/ms144259.aspx to get all possible cmd line args. Then I used the IS PRQ editor to create the basic .prq structure. Then I hand-edited the .prq (xml) file for (a) easy minor adjustments in the future and (b) to simplify version control diffs.
<?xml version="1.0" encoding="utf-8"?>
<SetupPrereq>
<conditions>
<condition Type="16" Comparison="2" Path="[ProgramFilesFolder]Microsoft SQL Server\100\COM" FileName="sqlresld.dll" ReturnValue="2007.100.1600.22"/>
</conditions>
<files>
<file LocalFile="<ISProductFolder>\SetupPrerequisites\Microsoft SQL Server 2008 Express with Tools\SQLEXPRWT_x86_ENU.exe" CheckSum="BCC335711D44BAFC420B5165D2F04647" FileSize="0,229169680"/>
</files>
<execute file="SQLEXPRWT_x86_ENU.exe" requiresmsiengine="1"
cmdline ="/INSTANCEID=AV /INSTANCENAME=AV /ACTION=Install /FEATURES=SQLENGINE,SSMS /HELP=0 /ERRORREPORTING=0 /SQMREPORTING=0 /INDICATEPROGRESS=0 /QUIETSIMPLE=1 /FILESTREAMLEVEL=0 /ENABLERANU=1 /TCPENABLED=1 /NPENABLED=0 /ADDCURRENTUSERASSQLADMIN=1 /AGTSVCACCOUNT="NT AUTHORITY\NETWORK SERVICE" /AGTSVCSTARTUPTYPE=Manual /BROWSERSVCSTARTUPTYPE=Automatic /SQLSVCSTARTUPTYPE=Automatic /SQLSVCACCOUNT="NT AUTHORITY\NETWORK SERVICE" /RSSVCSTARTUPTYPE=Automatic"
cmdlinesilent="/INSTANCEID=AV /INSTANCENAME=AV /ACTION=Install /FEATURES=SQLENGINE,SSMS /HELP=0 /ERRORREPORTING=0 /SQMREPORTING=0 /INDICATEPROGRESS=0 /QUIETSIMPLE=1 /FILESTREAMLEVEL=0 /ENABLERANU=1 /TCPENABLED=1 /NPENABLED=0 /ADDCURRENTUSERASSQLADMIN=1 /AGTSVCACCOUNT="NT AUTHORITY\NETWORK SERVICE" /AGTSVCSTARTUPTYPE=Manual /BROWSERSVCSTARTUPTYPE=Automatic /SQLSVCSTARTUPTYPE=Automatic /SQLSVCACCOUNT="NT AUTHORITY\NETWORK SERVICE" /RSSVCSTARTUPTYPE=Automatic"
/>
<dependencies>
<dependency File="<ISProductFolder>\SetupPrerequisites\Microsoft Installer 4.5 for XP.prq"/>
<dependency File="<ISProductFolder>\SetupPrerequisites\Microsoft Installer 4.5 for Windows Server 2003 or 64 bit XP.prq"/>
<dependency File="<ISProductFolder>\SetupPrerequisites\Power Shell 1.0 for Windows XP.prq"/>
<dependency File="<ISProductFolder>\SetupPrerequisites\Power Shell 1.0 for Windows Server 2003.prq"/>
</dependencies>
<properties Id="Microsoft SQL Server 2008 Express with Tools" Description="This installs Microsoft SQL Server 2008 Express Edition (SQL Server Express). The /qn switch suppresses all Setup dialog boxes and error messages. See http://msdn2.microsoft.com/en-us/library/ms144259.aspx for more information about the commad line options. The SQL setup logs to %programfiles%\Microsoft SQL Server\100\Setup Bootstrap\Log\"/>
</SetupPrereq>