I recently installed my first SQL 2008 Active\Passive cluster. The SQL 2008 install process is a lot more comprehensive than previous versions of SQL Server. The setup screens give you great flexibility like being able to completely customize data and log file locations, adding users to the sysadmin role at install time and on and on. During my install I documented the steps. Although, this walkthrough is not ideal for all situations, I am posting it with the hope that someone else will find this information useful:

Tips for Avoiding Install Problems

1. Restart both nodes prior to beginning the installation of the SQL Server software.
2. Make sure the network connection names do not have any trailing or leading spaces. I got caught on this issue once and now I always check this before I start the install.

3. Use the physical node names when using remote desktop. This way if you have to failover you will not get disconnected.

Prerequisites

1. Install .NET Framework 3.5 SP1 on both nodes. Information: Dot NET Framework 3.5 is the minimum requirement. At the time of the install I used 3.5 SP1 instead because it contained several important security fixes.
2. Configure Microsoft Distributed Transaction Coordinator as a clustered resource.
   a. From the Failover Cluster Management application right click on the Services and Applications tree node and select Configure a Service or Application
   b. Click Next on the High Availability Wizard page
   c. Select Distributed Transaction Coordinator (DTC) from the list of services and applications. Click the Next button
   d. Enter the Name MSDTC on the Client Access Point page
   e. Choose the Storage Resource to be used for the DTC service. Server 2008 requires separate disks for MSDTC and the Quorum. Once you select the storage resource click the Next button.
   f. On the Confirmation page click the Next button. The resource will be created and configured.
   g. On the Summary page click Finish.
   h. View the properties of the MSDTC server. On the general tab select the primary node as the preferred owner and click the OK button.
3. Request AD Accounts and add them to an AD Group. For security reasons it is best to have one account for each service. For maintenance reasons it may be easier to limit the accounts.
4. Copy the installation media to the server along with any needed service packs.

5. Disable Windows Firewall if it is running.

Installation Steps

1. Start the installer by running setup.exe from the primary node. The setup may prompt you to install a few pre-requisites such as a new version of Windows Installer. Click OK to install the pre-requisites. Any pre-requisites will probably require a reboot.
2. When the SQL Server Installation Center dialog appears click on the Installation label on the left hand side of the dialog.
3. Click on New SQL Server failover cluster installation. A new dialog will appear that will check minimum requirements. If your system passes the check, then you may click the OK button.
4. On the Setup Support Files page click on the Install button. This will stage the setup files to the local disk.
5. On The Setup Support Rules page review the validation report. Do not continue until you have 0 failures. If you have warnings you can continue, however it is recommended that you contact your sysadmin regarding these warnings before continuing with the install. If you fail a particular test, resolve the underlying problem and click the Re-Run button. Once you have passed validation click on the Next button.
6. In The Product Key page enter in the registration key. For media downloaded from MSDN the field should be pre-populated. Click the Next button.
7. On the License Terms page, check the "I accept the license terms" checkbox and click the Next button.
8. On the Feature Selection page click the Select All button. The Shared feature directories can be left as defaults. Click the Next button.
9. On the Instance Configuration page
   a. Set the SQL Server Network Name with the value of the virtual name you are going to use.
   b. If this is the first instance in the cluster the select the Default instance radio button. Otherwise, fill in a value for the named instance.
   c. Leave the Instance root directory as is.
   d. Click on the Next button
10. On the Disk Space Requirements page review the disk usage summary. If you have sufficient space for the install you will see a green checkmark. Click the Next button to continue.
11. On the Cluster Resource Group page select the SQL Server cluster resource group name. You must have at least one qualifying group before you can continue. Click the Next button.
12. On the Cluster Disk Selection page, make sure that at least one disk qualifies. In most installations you will have at least two disks (one for data and another for logs). Make sure that all the disks you plan on using for the install have a green checkmark in the qualified column. Click the Next button to continue.
13. On the Cluster Network Configuration page you should have at least one network setting specified. This default entry gets created as the default entry for the installation. Leave the defaults and click on the Next button.
14. On the Cluster Security Policy page
    a. Enter the AD group you created earlier for the Database Engine domain group
    b. Enter the AD group you created earlier for the SQL Server Agent domain group
    c. Enter the AD group you created earlier for the Analysis Services domain group
15. On the Server Configuration page
    a. For the SQL Server Agent enter the Account Name, populate the Password.
    b. For the SQL Server Database Engine enter the Account Name, populate the Password.
    c. For the SQL Server Analysis Services enter the Account Name, populate the Password.
    d. For the SQL Server Reporting Services enter the Account Name, populate the Password. Set the Startup Type to Automatic only if you are going to be using the service.
    e. For the SQL Server Integration Services enter the Account Name, populate the Password. Set the Startup Type to Automatic only if you are going to be using the service.
    f. For the SQL Full-text Daemon Launcher leave the setup defaults.
    g. For the SQL Server Browser leave the setup defaults.
    h. Click the Next button.
16. On the Database Engine Configuration page
    a. Go to the Account Provisioning Tab Add appropriate users/groups to the list of SQL Server Administrators
    b. On the Data Directories Tab, make sure the locations for each setting is pointed to the proper disks. Typically there is a separate location for data files and logs. In some systems we also split out tempdb.
    c. On the FILESTREAM tab leave the defaults
    d. Click the Next button.
17. On the Analysis Services Configuration page
    a. Go to the Account Provisioning tab : Add appropriate users/groups to the list of Administrators
    b. On the Data Directories directory, make sure the locations for each setting is pointed to the proper disks.
18. On the Reporting Services Configuration page select the Install, but do not configure the report server option and click the Next button.
19. On the Error and Usage Reporting screen leave all options unchecked and click the Next button.
20. On the Cluster Installation Rules page, verify that all the tests were passed and then click on the Next button.
21. On the Ready to Install page review the installation configuration. It is worthwhile to review all of the settings now. It is much easier to change things before they are installed. Click on the Install button to start the installation.
22. If everything went well you should see a summary screen stating Your SQL Server 2008 failover cluster installation is complete. If you had problems, review the summary log by clicking on the blue hyperlink on the top of the page.

23. Now you have to run the installer on the other node(s). When you run the installer on the other nodes in the cluster an auto-discovery algorithm will run. After auto-discovery completes, the settings used in the initial installation will be applied to the current node. Basically, just accept the defaults until the installation is finished.

References

MSDN - Installing a SQL Server 2008 Failover Cluster
http://msdn.microsoft.com/en-us/library/ms179410.aspx