UPDATE: Apparently, a workaround is to use SETUP.EXE from install media (and not the locally installed SETUP.EXE). See the connect item mentioned below.
All my attempts so far to rebuild the system databases in 2008 R2 has failed. I first tried to run setup from below path:
C:\Program Files\Microsoft SQL Server\100\Setup Bootstrap\Release
But above turns out to be the 2008 setup program, not 2008R2 setup; even though I have no 2008 instanced installed (I have only R2 instances installed). Apparently, the 2008 setup program does a version check of the instance to be rebuilt and since it is > 10.50.0, the rebuild fails. Books Online for R2 the section about rebuilding system databases, has the above path, which obviously is incorret.
So, this lead me to think that the path to use is infact:
C:\Program Files\Microsoft SQL Server\100\Setup Bootstrap\SQLServer2008R2
Above does indeed contain the R2 version of the setup program. The problem now is that it refuses to rebuild for some other reason. I opened a question in the MSDN forum, and Xiao Min Tan opened a connect entry for this: https://connect.microsoft.com/SQLServer/feedback/details/564905/rebuilding-system-databases-for-sql-server-2008-r2.
Meanwhile, waiting for a resolution for above, I strongly recommend you to do both file-level backup as well as SQL Server backup of your system databases, from a good known clean state of them. Remember to do file-level backup of the database files, in case your instance won’t start.
(Here’s a prior blog post about rebuilding system database, btw: http://sqlblog.com/blogs/tibor_karaszi/archive/2008/08/29/rebuild-master-in-sql-server-2008.aspx
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