Yesterday I tried to install Microsoft ® Business Data Catalog Definition Editor, while installing it I am getting the error as “SetParent failed for database”. The expected causes for this are
1) Not having the proper permissions to access \BDC instance.
2) BDC instance may not exist. If we run the (d:\Program Files\2007 Office System Developer Resources\Tools\BDC Definition Editor) ApplicationDefinitionEditor.msi file directly it will cause this error, Instead click on setup.exe file. This will check the prerequisites, and also it creates the BDC instance in your Database server.
With the second option my problem got solved.