>According to Microsoft Licensing Product Use Rights document:
>You may, however, use a tool to run queries or reports from existing tables, or use a development environment or workbench which is part of the Integrated Application to configure or extend such Integrated Application.
>

Thank you Sergey. That document was a little outdated (2003), but you pointed me in the right direction and I found a newer EULA that essentially says the same thing:

http://www.microsoftvolumelicensing.com/Downloader.aspx?DocumentId=3116

>>Has anyone here distributed the SQL Server Runtime version with their app? It is available as part of the ISV Royalty program, and the licenses are much cheaper than the full license. The catch is that the copy of SQL Server you distribute can only be used with your app. Microsoft is vague on what that actually means, and I'm having a hard time getting details out of them or distributors.
>>
>>This much is clear: they don't want users getting a cheap copy of SQL Server from us and using it for all of their database needs. Essentially, they can not create or host other databases in SQL runtime. However, what if they want to connect to OUR database from Access, Excel, Crystal Reports, whatever? Those are tools for working with the database, not other applications with their own database. That's the part I'm trying to get an answer on. If you have been down this road before, I'd appreciate your thoughts.