According to the product documentation system requirements it states SQL Express is not recommended. It doesn't say you can't configure BizTalk server with SQL Express. This statement is going to create some confusions for people especially new to BizTalk Server.

The short answer is "DO NOT configure BizTalk Server with SQL Express". Not even for your development machines. For development use SQL Server developer edition, which normally comes as part of your MSDN subscription.

Let me add some of the drawback of using SQL Express for BizTalk Development.

There is no SQL Agent service in SQL Express:

BizTalk server heavily depends on nearly a dozen SQL server jobs and hence SQL Agent for variety of BizTalk server functionality. You can see the full list and their functionality here http://support.microsoft.com/kb/919776. These jobs are critical even for development machines. The SQL Server jobs takes care of variety of things, some of the important once like moving your tracked data from BizTalk Message Box data base to Tracking database. Hence its almost impossible to have a productive developer environment without SQL Agent running.

There is no Integrations services in SQL Express:

If you need to work with Business Activity Monitoring (BAM) functionality in BizTalk server, then the part of SQL integration services becomes critical. BAM relies on SSIS for variety of purposes like moving data from BAMPriaryImport database to BAMArchive database. The worst thing is BAM management utility bm.exe is heavily dependant on this service and it won't function with integration service. Hence you will not be able to deploy your BAM activities into the BAM Primary import database.

There is a version of SQL Express with Advanced services, even this version doesn't include SQL Agent and Integration services. Hence to have a productive development experience don't waste your time trying to configure BizTalk on SQL Express.

-Saravana