I have a Team Foundation Server 2008 Installation and a separate machine with the Team Build service.
I can create team builds and trigger them manually in Visual Studio or via the command line (where they complete successfully). However check ins to the source tree do not cause a build to trigger despite the option to build every check in being ticked on the build definition. Update: To be clear I had a fully working build definition with the CI option enabled.
The source tree is configured is a pretty straight forward manner with code either under a Main folder or under a Branch\branchName folder. Each branch of code (including main) has a standard Team Build definition relating to the solution file contained within. The only thing that is slightly changed from default settings is that the build server working folder; i.e. for main this is Server:"$\main" Local:"c:\build\main" due to path length.
The only thing I've been able to guess at (possible red herring) is that there might be some oddity with the developer workspaces. Currently each developer maps Server:"$\" to local:"c:\tfs\" so that there is only one workspace for all branches. This is mainly to avoid re-mapping problems that some of the developers had previously gotten themselves into. But I can't see how this would affect CI.
UPDATE: Ifound the answer indirectly; please read below