I am using SQL Server 2000 MSDE for Test Development of a site in .Net. The MSDE is installed on my workstation and the web site is depolyes on a web server. When I try to access data from the site at the development server, the connection to the SQL Server MSDE fails, saying:
System.Data.SqlClient.SqlException: SQL Server does not exist or access denied
But when I access the web site from the same box where the SQL Server MSDE is installed, everything works fine.
Your connection is just fine, it's the network library that you skip, that causes the issue. You can either replace the reference to the MSDE box (it actually would behave the same way with the real SQL Server BTW) with the IP address, or specify named pipes library in the connection string. To do the latter add ";Network Library=dbnmpntw" to the end of your connection string.