Dunno if this is resolved yet but...

Is this mssql2005 or mssql2000?

I am guessing this db is hosted remote;;; and there is some configurations you have to go through in mssql2005 (Surface Configuration; Aliases, etc) to allow remote connections. You may want to check that. Also, as a test, try setting up an odbc on the server that is hosting the DB. Use localhost.

What port are you trying to connect over? In the ODBC if you click the 'Client Connections' tab; HOW is it trying to connect? TCP/Ip; Named Pipes, Both... ?

Just some things that have tripped me up as I learn...