I have a single domain lab network called training.local , 2 server running Exchange 2003 , I am trying to introduce a third Exchange 2007 Server and transition users from Exchange 2003 to Exchange 2007.
Step 1: Install MMC 3.0
Step 2: Install Windows Power Shell 1.0
Step 3: Prepare Legacy Exchange Permissions
If you are currently running any Exchange 2000 or 2003 server the first command you must run is
Setup.com /PrepareLegacyExchangePermissions
Here it fails because I don’t have all the Exchange 2003 servers in the org running SP2.

Second time lucky
Step 4: Prepare Schema
Run the following command using a schema admin account (Since this is a lab I am running this process as the godfather of the domain i.e. enterprise admin)
Setup.com /PS
PS is short for prepare schema
Step 5: Prepare Active Directory
This command created the additional security groups that exchange 2007 introduces in AD.
Setup.com /PrepareAD
Did not see a short-hand for this command….just type the full command or use tab after typing in the first few words , power shell completes the command for you.

Note: If you have not completed Step 3, setup /PrepareAD will perform the PrepareLegacyExchangePermissions step. To complete the PrepareLegacyExchangePermissions step, the domain in which you run this command must be able to contact all domains in the forest. If you are also a member of the Schema Admins group, and if you have not completed Step 2, setup /PrepareAD will perform the PrepareSchema step.
Verify that this step completed successfully, make sure that there is a new organizational unit (OU) in the root domain called Microsoft Exchange Security Groups. This OU should contain the following new Exchange USGs:
Step 5.1 Prepare Active Directory
None of these setup commands apply to me right now since I just have one domain training.local which was already prepared when I ran the \PrepareAD switch. But just as a reference.
- Run setup /PrepareDomain to prepare the local domain. Note that you do not need to run this in the domain where you ran Step 3. Running setup /PrepareAD prepares the local domain.
- Run setup /PrepareDomain:<FQDN of domain you want to prepare> to prepare a specific domain.
- Run setup /PrepareAllDomains to prepare all domains in your organization.
AD is now prepared…moving on to the next step on installing Exchange 2007 next week!
Ref: http://www.msexchange.org/tutorials/Installing-Exchange-2007-Part1.html