A Parting Problem
One problem occurred while I was trying to make all this work on my computer. When my program tried to connect to the server, it failed with the following message:
After a lengthy online investigation, I discovered that this problem occurs if MSDE reverts to using Windows user authentication. It would not allow the default user sa to connect to the server, presumably because there is no account named sa on my computer. This problem can occur if you had a previous version of MSDE installed, and I did.
Setting the SECURITYMODE=SQL parameter in the setup.ini file before you finish the MSDE installation should prevent this problem. If you happen to have this problem, look at this MSDN article for more information and workarounds.