error "Failed to generate a user instance of SQL Server due to a..."

Have you ever tried to create a user instance database from Visual Studio on SQL Server 2005 Express (or above) and got this terrible (can it be more confusing?) message: "Failed to generate a user instance of SQL Server due to a failure in starting the process for the user instance. The connection will be closed." If you did and tried to find how to resolve this you probably Googled (or Binged) for hours without being able to find the solution that really works. Well lets put an end to that. Two simple things need to be done...