Installation issues - Connection to the specified server has failed

Hi
i am trying to install sap server on windows 2008.my SQL server is on another box with windows 2003 and SQL 2008
select server type drop down is blank and after entering SQL server name/user/password i am agettig this error
"Connection to the specified server has failed"
to make sure i have access to sql server ,i hav installed SQL 2008 native client and created one test odbc DSN to test that my serevr is talking to database server
databse and both 2003 and 2008 machines are 64 bit
Please help

yes
one thing i am noticing when i run install is i am getting this message on first screen
so is the setup i ma running really compatible with SQL 2008?
i am runing the setup from Patch0 because other patch downlads do not have ther server setup
The installer detected an outdated version of MSSQL installed on this machine.
If you are using another type of database to run SAP Business One, such as DB2 or MaxDB, press Skip.
To upgrade your MSSQL version exit this installation. Only an experienced system administrator or DBA should upgrade the database.

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