Can VS Express create Setup.Exe? No.
If you study the license, you will find that the Express release is not intended to be a distribution (I don't have the exact wording here). Thus, MS left the installation generator out of the package.
You can use any third-party installation manufacturer, but then you can violate the license.
Edit: The above applies to VS2005 Express.
Licenses for 2008 and 2010 Express seem more lenient, check.
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