The VSSConverter tool which allows you to convert from VSS to TFS will attempt to utilize a local version of SQL Express.
This sucks, as I hate SQL Express.
After some searching/trials/errors, I found a way to get it to work against a SQL Server 2005 database.
Just add the SQL tag to your migration settings xml file like so:
<Source name=“VSS“>
<VSSDatabase name=“D:Program FilesMicrosoft Visual SourceSafeVSSHttp“></VSSDatabase>
<UserMap name=“D:VSS2TeamFoundationUsermap.xml“></UserMap>
<SQL Server=“name_of_your_SQL_Server“ />
</Source>