Hi there,
Join the club of unfortunate programmers! Just kidding... You should find the solution to your problem within the excellent page of Richard Dudley:
http://aspalliance.com/532_Understanding_the_Login_Failed_Error_in_Crystal_Reports[
^], where not only the article is great, but also the comments of all of us (programmers). For example the answer that suit me were somewhere in the middle of the page, and says that you have to install "SQL Native Client" to a client computer to let your app work!
Best regards and Enjoy reading!