When starting the RTC client or open the database in classic client you will get a warning if you have not set the trace flag correct. Because of changed security in SQL Server 2005 Dynamics NAV 2009 will only connect to the SQL Server if the trace flat ‘4616' is set.

How to:

1. Open SQL Server Configuration Manager
2. Right click on MSSQLSERVER and select properties
3. In properties click advanced tab
4. Click to the right of Setup Parameters and go to the end of the line
5. Add this string ";-T4616"
6. Click ok and restart your SQL Server.