I was able to correct this behavior by allowing Remote connections on sql server. But I am not sure on why and how these things are connected.

Gift Peddie (4/16/2009)

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Then drop it and create a new one this time make sure auto populating option is used. This will show if something is wrong with your install....

The Full text service associated with the sql server is on. I even restrated it in my attemts. Also since I was able to use full text services yesterday there...