When you try to install System Center Virtual Machine Manager 2007 R2 and configure it with an existing SQL Server installation, you must have named pipes enabled on the SQL Server. If named pipes are not enabled, you will receive the following error:
setup cannot connect to the specified sql server instance
Also, when using a SQL Server 2008 installation, you must install the SQL Server 2008 Native Client and SQL Server 2008 Command Line Utilities on the SCVMM Server. Both can be installed from the SQL Server CD or downloaded from http://www.microsoft.com/downloads/details.aspx?FamilyId=C6C3E9EF-BA29-4A43-8D69-A2BED18FE73C&displaylang=en
