You may receive this error when installing a template with .vsi installer, such as AJAXToolkitExtender installer:

Installation stopped because the directory for the ProjectType value did not exist. The project type is invalid for your installation of Visual Studio.

The cause is the missing of the specific template folder for each language under “C:\Documents and Settings\xxxxx\My Documents\Visual Studio 2005\Templates\ProjectTemplates\”. For VB.NET, manually create a folder named “Visual Basic”; for C#, manually create a folder named “Visual C#”. This will fix the above error.

Another way to fix this error is to reset the Import/Export settings in Visual Studio:
1. Tools -> Import and Export Settings… -> Reset all settings
2. Follow the instructions of the wizard.

You can also reset the Visual Studio IDE through the command line:
“%programfiles%\Microsoft Visual Studio 8\Common7\IDE\devenv.exe” /resetuserdata

Make sure Visual Studio is closed when the command is executed.