I have set up the same environment you have and discovered SQL 2008 Express will not work. Altiris wont directly say why but if you revert to SQL Express 2005 you will be able to install. In case you dont know, when installing Deployment Server your database will be named eXpress by default. When installing SQL Express 2005 your default instance will be servername\SQLEXPRESS
servername\SQLEXPRESS
This instance name will need to be provided in this format during the install when prompted for your database.
One of the most important things I ran into was I needed to have an account assigned to the local admin group AND be actively logged onto server I was installing Deployment Server on with this same account.
When SQL Express installs it will automatically add the local admin group to the SQL Group "Builtin\Administrators" meaning the windows account you put into the local admin group which should be the same account you are logged onto doing the install will have all the rights to create the database in the SQL 2005 Express engine you have loaded.
It sounds like you are doing everything right but Altiris does not have the correct credentials to connect to the database or it connects to the database but does not have sysadm access to the instance (servername\SQLEXPRESS) so Altiris is not creating the fields it needs at the point you are getting the error. I dont know your background so dont think I'm insulting your intellegence, when you use SQL Express download the SQL Express Management Studio:
http://www.microsoft.com/downloadS/details.aspx?familyid=C243A5AE-4BD1-4E3D-94B8-5A0F62BF7796&displaylang=en
Logon as the account you created to install Altiris and see if you can open this utility. If yes then your account is working correctly and you may have not specified the database correctly during install. As a safety net, open the management studio and expand Servername\SQLExpress -> Security -> Server Roles -> Right-Click sysadm
Verify Builtin\Administrators is in the group and verify the account you are currently logged is as is in the local admin group. As for security, this account is ONLY needed during the initial install and is required to remain on the system but you can secure it with things like disabling interactive logon and so on BUT the account has to remain in the local admin group and has to remain on the system.
Hope this helps.