The SequentialWorkflowFeature.vstemplate file does not create the required workflow.xml file when you add. It appears to want to create an elements.xml file, but I don't think that is correct either. When you try to execute the workflow it complains
with the following error message:
The workflow template has specified no FormURN for this page
which is really a round about way of saying "Hey! Your FEATURE lacks a workflow.xml file!".
I'm going back to the old-fashioned way of letting VS 2008 create the solution and project and hand-carving my own manifest, ddf and wsp files until this bug gets fixed.