When you try to add a site to a replicated environment through the Vault Server installer you see a message stating that the installation cannot continue because an "An incompatible database version was detected that cannot be migrated". This is happening because the installer on the disk is checking for a specific database version. The database version would have been changed by applying Update 1 or 2.
This also happens in the following scenarios...
An Upgrade From Vault 2010 Update 2 to Vault 2011
An Upgrade from Vault 2011 (Server) Update 2 and you try to upgrade to Vault Workgroup\Collaboration\Professional 2011 (Server).
There are two workarounds.
Uninstall Vault, and SQL
Delete both the Filestore and the Database
Install Vault *Workgroup\Collaboration\Professional2011 (Server)
Install Vault Server 2011 Update 1 & 2
Restore the the latest Vault Backup.
Second Workaround (Avoiding a lengthy restore process)