I know this is an old thread but figured I would post here instead of creating a new one. I too am having this issue. The odd thing is I get the error when I try to connect to the SQL Server using .NET code( VB.NET or C#). However, I tried using VB6 and it connects to the DB just fine and pulls the data(using the EXACT same connection string).
Remote connections is enabled, TCP/IP and naming pipes are enabled, I added both the TCP port 1433 and UDP port 1434 enabled in windows firewall and remote connections is enabled, I'm able to ping the IP of the server as well. I just find it really really odd that I can connect via a VB6 app but not a .NET app. Does anyone have any other ideas what I can try?