Background

While installing first Exchange 2007 server in an Exchange 2003 domain, setup fails during /PREPAREAD

Error Message

Preparing Exchange Setup
No server roles will be installed

Performing Microsoft Exchange Server Prerequisite Check
    Organization Checks              ......................... COMPLETED
Configuring Microsoft Exchange Server
    Organization Preparation         ......................... FAILED

The object 'CN=All Groups,CN=All Address Lists,CN=Address Lists Container,CN=<name>,CN=Microsoft Exchange,CN=Services,CN=Configuration,DC=<name>,DC=<name>,DC=<ending>' already exists.

This can also happen to "All Contacts" and "All Users", and is likely inherited from an Exchange 5.5/2000/2003 upgrade.

Solution

1. Access ADSIEdit (available via Support Tools on Server CD, \SUPPORT)
2. Open Configuration, Configuration Folder, Services, Microsoft Exchange
3. Open Domain folder (ie. "Company Name")
4. Address List Container, All Address Lists
5. Right click on each of All Contacts, All Groups, All Users and choose Properties.
6. Locate the property, "purportedSearch", of type "Unicode String" and verify their contents as follows:
   All Contacts
   Replace (& (| (mail=*) (proxyAddresses=*) (textEncodedORAddress=*)) (| (& (objectCategory=person) (objectClass=contact)) ))
   with (& (mailnickname=*) (| (objectCategory=group) ))
   All Groups
   Replace (& (| (mail=*) (proxyAddresses=*) (textEncodedORAddress=*)) (| (objectCategory=group) ))
   with (& (mailnickname=*) (| (objectCategory=group) ))
   All Users
   Replace (& (| (mail=*) (proxyAddresses=*) (textEncodedORAddress=*)) (| (& (objectCategory=person) (objectClass=user)) ))
   with (& (mailnickname=*) (| (&(objectCategory=person)(objectClass=user)(!(homeMDB=*))(!(msExchHomeServerName=*)))(&(objectCategory=person)(objectClass=user)(|(homeMDB=*)(msExchHomeServerName=*))) ))
   
   Be careful with wraparound.
   Update: http://support.microsoft.com/kb/936907/en-us may have more information that you may find useful!
7. Re-attempt setup /prepareAD