I recently rebuilt my development VM and installed Visual Studio 2008, SP1 followed by the Windows Mobile 6 SDK Refresh and the Windows Mobile 6.1 Emulator Images. When opening a solution with a project that targetted the Windows Mobile 6 platform I received "the application for the project is not installed".
Seems like other people have had the same issues, but simply uninstalling and reinstalling (repairing did not work) the SDK Refresh seemed to fix it. The same applied for the 6.1 Emulator Images as initially they were not available as a deployment target, but once I uninstalled and reinstalled them they were. Very odd.