It's not like we can see your desktop from here.....
You should include in your question:
Where is SQL server installed ?
You meant SQL Server 2005 Express ? (Must be hmm ?)
You using Visual Studio (X) ? Server Explorer ?
Did you closely read the readme file ? (http://support.microsoft.com/kb/910229)
Look for "3.1 Service Account and Network Protocols"
Cheers.