Solved! Go to Solution.
Can you post all your code? Are you sure the connection file exists in that location? Are you attempting to run this as a service/task while not logged in?
Also, please read this on posting code.
http://forums.arcgis.com/threads/48475-Please-read-How-to-post-Python-code
arcpy.env.workspace = "C:\\Data\\Connection to ARC1_SQLExpress (2).sde"