OS: Windows 2008 R2, SQL 2005 Standard Edition, vCenter 5.0
Scenario: I was upgrading from vCenter 5.0 to vCenter 5.1a. The SSO installation failed as it could not connect to the local SQL database.
Caveat: I had upgraded from SQL2005 Express to standard on the same server as our vCenter inventory had grown too big for Express
I could connect via SQL Server Management Studio. I had noticed that Mixed-Mode was disabled so I enabled this first (you do need this as a pre-req anyway). Still no luck. I then made sure TCP/IP was enabled in the SQL Server Server Configuration Manager (it was anyway). Very odd.
I had a quick Google around and noticed that SQL Express 2005 is installed with dynamic ports enabled by default. As this Database was upgraded this was still enabled in the TCP/IP configuration. See below.
If the TCP Dynamic Ports field is 0 then SQL will not be binding to 1433. Set this to blank and then manually input the TCP port (as seen below)
Bingo! I can now telnet to localhost! Now to upgrade vCenter.