Cant Connect To A SQL2K5 Express User Instance

(have reposted this here from Setup group, since no answers there)

Hi,
I am having a lot of trouble connecting to a user instance I've created. User instances have been enabled, Named pipes are also enabled. Running on XP SP2 with SQL2K5 SP2. I also have a standard SQL2005 instance running on this development machine.

When using SqlClient in a .Net2.0 application, my connection string to create the user instance looks like:
"Data Source=.SQLEXPRESS;integrated security=true;attachdbfilename=c: emp3500.mdf;user instance=true"

This connection succeeds and I see the new service being started etc. I also see the log file being created in my Application Data area. The log file all looks normal except for these lines at the very top of the report.

2008-04-15 16:29:13.57 Server Error: 17156, Severity: 16, State: 1.
2008-04-15 16:29:13.57 Server initeventlog: Could not initiate the EventLog Service for the key 'D69F8BFF-E490-47'.
2008-04-15 16:29:13.67 Server Error: 17054, Severity: 16, State: 1.
2008-04-15 16:29:13.67 Server The current event was not reported to the Windows Events log. Operating system error = 6(The handle is invalid.). You may need to clear the Windows Events log if it is full.
2008-04-15 16:29:13.67 Server Microsoft SQL Server 2005 - 9.00.3054.00 (Intel X86)



I can also run a query on the main express instance to check if a child instance is running:
SELECT owning_principal_name, instance_pipe_name, heart_beat FROM sys.dm_os_child_instances

gives:
METECHsteve \.pipeD69F8BFF-E490-47 sqlquery alive

If i try to connect via sqlcmd with this command line:
C:Program FilesMicrosoft Visual Studio 8VC>sqlcmd -S np:\.pipeD69F8BFF-E49
0-47 sqlquery -l 60

this will give:
HResult 0x57, Level 16, State 1
SQL Network Interfaces: Connection string is not valid [87].
Sqlcmd: Error: Microsoft SQL Native Client : An error has occurred while establishing a connection to the server. When connecting to SQL Server 2005, this failure may be caused by the fact that under the default settings SQL Server does not allow remote connections..
Sqlcmd: Error: Microsoft SQL Native Client : Login timeout expired.


If i try to connect via SSMS using the pipe name above and everything else defaulted, i get the following error:
An error has occurred while establishing a connection to the server. When connecting to SQL Server 2005, this failure may be caused by the fact that under the default settings SQL Server does not allow remote connections. (provider: SQL Network Interfaces, error: 25 - Connection string is not valid) (.Net SqlClient Data Provider)


Both errors are pretty similar. I am running this locally, so I suspect the 'remote connection' error text is a red herring. The connection string is pretty minimal so I cant see why the connection string is invalid.

Heres another wierd thing. It used to consistently work. It now consistently fails. I have also tried creating a VM with SQLX. Now that works initially but once it fails, it seems to fail consistently. Reboots of the VM dont seem to fix it. That sort of leads me to believe that I've done something to my server (ie a setting somewhere).

Any help getting this connection issue sorted would be appreciated!

Thanks,
Steve