Cannot select XSD Message element when Setup project included in Solution


I am unable to select a XSD schema when a setup project is included in the Solution. It produces an error dialog 'Object reference not set to instance of an object'. This is with the 2008 modeling edition.
To reproduce the error: Create a new solution. Add a modeling project to solution. Add Setup project to solution. Add a Service contract model to modeling project. Select WCF or ASMX as implementation technology. Drag XSD message to designer. Click XSD Message and then click the ellipse next to element.