Here’s a quick tip, should you ever run into this error message when trying to migrate a Visual Studio Setup project from Visual Source Safe to Team Foundation Server.
"This project cannot be bound to source control because some of the files in this project are contained in folders that are already bound, and whose binding is not valid for this project."
So VS got confused. Under File > Source Control > Change Source Control, unbind each project. Then, bind the Setup Project first. No worries, now you’re good to go.