More symptoms and solutions for connecting to SQL Server 2008. Other articles for similar problems can be found at:

KB Article Q13357 - Troubleshooting connectivity issues between the Hach WIMS Client and MS SQL Server

KB Article Q13487 - Can Ping/Connect, But Cannot Get Data When Source is on Microsoft Windows Server 2008

Symptom: On the server I can get a good connection, using UDL, to localhost\sql2008 (where sql2008 is my SQL instance). I open a command prompt and enter IPCONFIG to see that my IPv4 Address is 10.128.131.51. When I use 10.128.131.51\sql2008 I get an error message stating that the instance does not exist.

When I ping localhost from the command prompt we see:  ...ping statistics for ::1: - which implies IPv6. I open up SQL Server Configuration Manager and navigate to SQL Server Network Configuration > Protocols for SQL2008 (where SQL2008 is my instance name). Right click on TCP/IP and select Properties.

Click on the IP Address tab and on our installation we show 11 IP listings. I found that IP2 had an IPv4 address already, so I Activated it and Enabled it. Also, make sure the IP Address is correct - mine was different than the actual IP address of the virtual machine.

Now click Apply and OK, it will tell you that you need to restart the services - so I restarted them and retest the UDL. It worked perfectly. Hope this helps you!