I was experiencing the same error when I installed the full Nuget with Orchard following this guide http://espenao.posterous.com/create-nuget-gallery-with-orchard-using-the-i (I had no joy following http://docs.nuget.org/docs/contribute/setting-up-a-local-gallery).
In our use case (CI/VS2010 Integration), the orchard website is not needed. Instead I pulled down the latest code from codeplex and built it using build.cmd located in the root.I had VS2010 installed on the machine, but I don't think it is needed.
I then expanded the archive bin\NuGet\Server\server.zip to a convenient directory (lets call it [serverDir]). I then setup a website in IIS pointing to the [serverDir] listening on port 80. I changed the app pool to .Net 4.0. Everything else is default.
I am using Windows Server 2008 R2 x64 with all the latest patches.
I then went to http://localhost/ and it worked like a champ. The splash page told me to set an api key. In this implementation, I believe there is only one API key for the entire feed, which is perfect for our use case. I set the key in [serverDir]\web.config.
I set it to "apikey" to be easy (note: this breaks the package explorer push but not the nuget command line push).
The splash page also tells you how to push packages and list packages in VS2010/Nuget command line.
Now to figure out a way to remove all previous versions of a package that isn't too hackish (we only care about the latest version in our CI environment).