Typically, Connection Refused: Connect indicates a security setting on the DB. Check that your Client IP address has permissions in addition to the username and password being correct. The easiest way is to connect with another application (Enterprise Manager or FactorySQL) with the same username and password from the same machine.
Are you using Express Edition (free) version of SQL Server 2005? If so, you need to add the following connection string:
‘instance=SQLEXPRESS;’ under “Extra Connection Properties” of the FPMI Gateway datasource connection.
Also, Check your FactoryPMI Gateway Status Page->Datasources. This will give you a more detailed error message (I don’t need the entire JDBC stack trace, though).
More info on the jTDS JDBC driver that FactoryPMI uses here and here