SQL Server 2005 doesn’t take remote Connections by default
Read this here. Short answer, to allow remote connections to your SQL2005 machine, you have to turn the feature on!
Well, it turns out that this is controlled by an EXTERNAL utility, the Sql Server Surface Area Configuration Tool which can be found in Start Menu Sql Server Configuration section. By default Sql 2005 indeed refuses remote connections and you need to run this utility to enable remote connections. Intuitive isn’t it?