Can’t Add New Items to WPF ModelView Application Projects from MVVM Template

I am running into a problem under certain circumstances with projects created by the WPF Model-View template for WPF applications in Visual Studio 2008.

When I try to add a new class to a project through the Visual Studio 2008 IDE I receive the following error message when I try to add a new class (or icon, LINQ to SQL file, etc):

I can reproduce this easily:

1. Open Visual Studio 2008 (with the WPF Model-View-ViewModel Toolkit installed, download here).
2. Create a new c# project with the new template.
3. Accept the default and have it add a test project as well.
4. Right-click on the Models folder, then Add->Class.
5. Choose your name and click Add.  The error above is displayed.

I am running Vista 64, Visual Studio 2008 SP1 with .Net 3.5SP1. There are no add-ins loaded except the debugger. I do not (typically) run as Admin, but this makes no difference in this case as the same behaviour is observed either way.

I do not see this problem if I do not add the test project.