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I hadn't realized this; thanks for letting me know. My only other suggestions for syntax and parameter sequencing are:sdesetup -o update_key -d SQLSERVER -u sa -p sa -D TFIPS -s hostname\sql2008r2 -i sde:sqlserver -l "C:\Program Files\ESRI\License10.1\sysgen\keycodes" sdesetup -o update_key -d SQLSERVER -u sa -p sa -D TFIPS -s hostname -i sde:sqlserver\sql2008r2 -l "C:\Program Files\ESRI\License10.1\sysgen\keycodes"
This assumes your database name is TFIPS and your instance name is sql2008r2 based on your screenshots. Otherwise, you may need to open a support ticket with Esri.
Very simplified answer. Thank you so much. Saved time.
worked for me