(different) error logging onto sql server / database help

When trying to connect to my sql server I get the following error :

Connection Failed :
SQLState:'08001'
SQL Server Error : 17
[DBNETLIB][ConnectionOpen(Connect))(.[SQL Server Does not exist or access denied]

im not sure how to give a user access or give the user the right password

I get the same error when trying to create a database and connect to the server.

Im working on xp pro, and using VS.net. also theres a red x next to the cylinder of the sql server, so im assuming im doing something wrong.Check these two things first:
Make sure the authentication method is the same in your pages as the way it's set up on the server

Also - if it's sql/mixed- make sure the login userID and PWD are correct.|||this is the line i have in the web.config file

<identity impersonate="true" userName="MIKE-\Michael"
password="cuomo23"/
how do I check what method is being used on the pages. and the server is which i choose, either windows nt. or sql? correct?|||is mike-\michael a valid user in the SQL database or the Windows Domain? Looks like a local machine account rather than a domain account. So is you web machine the same as the SQL server machine?