I have installed a new development computer at home (quad core, 12GB RAM dell studio xps) and have set up boot from VHD - to a win2008r2 machine.
I figured that setting up SQL and domain controlers on the host would be best, and hyper-v for guests (sharepoint 2007 and sharepoint 2010 beta) that would connect to the host machine's domain and sql.
However, when I tried to connect either version of sharepoint to the SQL, I got the same error:
SharePoint Products and Technologies Configuration Wizard
Failed to connect to the database server or the database name does not exist.
Ensure the database server exists, is a Sql server, and that you have the appropriate permissions to access the database server.
To diagnose the problem, review the extended error information located at C:\Program Files\Common Files\Microsoft Shared\Web Server Extensions\12\LOGS\PSCDiagnostics_2_17_2010_8_45_30_259_232810164.log.
Please consult the SharePoint Products and Technologies Configuration Wizard help for additional information regarding database server security configuration and network access.
The solution? I turned off the firewall on the host machine...So now I am open for attacks, but atleast my virtual machines can talk to my sql on the host... So instead of leaving it off, I just followed this MSDN article that explains how to open the ports for SQL...