The issues pertains to search which was missing from the "services on server" display (via Central Admin -> Operations -> Services on Server). Also the server roles list was disabled.
As the search service isn't present, SSP will not be created as there are no indexers.
This issue comes up because of configuration issue. While installing MOSS 2007, if WFE option is selected and not Complete installation, this issue will come up. It is mandatory to select "Complete installation" rather than doing a "Web front End" installation.
We can confirm if the MOSS installation is a complete or WFE one by going to the PSC diagnostics logs present in "C:\Program Files\Common Files\Microsoft Shared\web server extensions\12\LOGS". Search for the entry "Setting server role to WFE". This shall confirm if the installation is a WFE one.
Hope this helps.