>>This is a security issue. IIS is running under its own process. This process logs on on the machine using special local machine account. This account have no rights to access network as a usual domain network user, so probably it has no rights to access internet, for example. If your SQL Server is accessed through LAN, access it using machine name and SQL Server native logon or trusted connection.
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Well, would this not also apply in the development scenario? I can go to *any* machine on the network and navigate to my dev intranet and it works fine. Presumably, a similar special account is used in this case also which would have similar limited rights.

Also, the SQL Server is accessed thru the LAN, and I am using machine name and native logon (via dsn-less connection string).

Thanks for you input.

Del