I hit this error for the last day at a remote data center.
Got it on both the regular SQL client and the new SQL native client for SQL 2008. It turns out it's from network issues. DNS to be specific. Sure enough, I could ping the SQL server and the app server but could not resolve them.
Upon inspection DNS was messed up.
When using the new SQL native client for 2008 there is an option to enter an SPN. I put the <Domain Name.com> in there. Named Pipes did not work , but TCP sockets did and specified the port (1433 or what ever the instance is set too). Finally worked. After all SPN resolution is not going to work in DNS resolution will not work. /:>
Curt Spanburgh Microsoft Certified Business Solution Specialist. Dynamics CRM MVP Contributing Editor, Windows IT Pro
He that is walking with wise persons will become wise, but he that is having dealings with the stupid ones will fare badly. Proverbs 13:20