SQL Server does not exist or access denied
I hope you will get to see the above error message most often and I say a common question among forums & newsgroups. Few times you might be thinking why it is throwing error even though you are using right credentials to access that SQL Server instance. I have seen such as the basic assumption by those users getting this message believed that this is due to "Login process has failed" or "Login do not have correct permissions to connect". IN many case the second assumption is correct, as the 'access denied' is obvious error message when a login does not have privileges to do so. So the root cause of this error could be of many reasons, server-related and/or client-related and/or network-related.
Highlighting on server-related issues for this error, initial thing to checkup about whether that particular instance's SQL Server Services have been started and running successfully. Also quite often if the server naming convention is not followed properly, it is best to check whether SQL Server is not installed on the computer that you specify in the connection string. Next step is to see what are enabled protocols on SQL server instance, by default (for SQL 2000 and previous version) using the Server Network Utility on the server determines which protocols SQL Server will use and on which TCP/IP ports SQL Server will listen and for SQL 2005 version better to go with SQL Configuration Manager utility. On the client side using the Client Network Utility, an MDAC data source name (DSN), or your connection string determines which protocol and port your client uses when it connects.
Quite commonly I always suggest to refer this KBA328306 within the newsgroups I visit or tend to reply, within that article don't forget to check and confirm for additional information under 3 (server/client/network) related topics.