Forum Moderators: coopster
Also make sure that you're connecting to "localhost/SQLEXPRESS" (or whatever your SQL server instance name is). Connecting directly to localhost probably won't work for a SQL Express installation unless you changed a few defaults.
If all this fails, try replacing ntwdblib.dll in your PHP folder with an older version (there's a known issue with the current version distributed with the Windows PHP installation), then restart IIS for good measure.
Microsoft SQL Server 2000/2005 Driver [microsoft.com]