A common failure when running the prescan.exe is the 'Exception while looping through virtual servers.' error. This occurs when you do not have WSS 2.0 Service Pack 2 installed. There are a lot of posts on running prescan and helpful articles on TechNet, but few mention the dependency on Service Pack 2, and many companies who are afraid or have not upgraded for one reason or another will run into this issue, and I think it's worth mentioning. Upgrade to SP2 before attempting to run prescan.

Joel Olsen has a good post on prescan, and does allude to SP2's functionality. He mentions how to extract prescan out of sharepoint.exe (older post), but its easier to download it directly in you have not installed MOSS in an upgrade scenario - see post from Shane Young