I'm running Windows Server 2003. The deny setting was set in Admin Tools -> Local Security Policy -> IP Security Policies On Local Computer -> Default Security Policy

Phew, finally solved this ...

In "Local Security Settings" there was a "Default Security Policy" which had a "Deny" filter enabled for "MSDE/MS SQL"

Disabled the filter and hey presto !

I must...

Also; the SQL Browser Service is on and I have restarted the services after each config change.

And aplogies if this should have been posted in the Admin section.