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So, Team Foundation Server won't let you create a new workspace? Perhaps the computer name used to belong to someone else who used to have a workspace. Here is how you delete the old workspace.

Note: You must be logged in as a TFS Administrator. You can issue this command on any computer that is in the domain. You do not have to be on the client computer.

cd C:\Program Files\Microsoft Visual Studio 8\Common7\IDE
tf.exe workspace /delete /server:[your_TFS_server] [computer_name];[old_username]

For instance, user "joe" is trying to create a workspace on computer "comp1" that used to belong to user "bob". The name of the TFS server is "serv1"

tf.exe workspace /delete /server:serv1 comp1;bob