Lowell, I ran the script you had verbatim. I still get the same error message using this sql server login. The issue is who the DOMAIN\USER is. If they have permissions on the server then it works fine. If they don't it doesn't.

What SQL Server may be doing behind the scenes is to login with the windows credentials and then do a setuser command. Since it can't do the first login it fails.

Thanks,

Brian.