Jake,
Thank you for responding, I did confirm that the user account I was logging in to the Client machine were present in the SQL Server Express instance on the Host Server (see attached image).
[ATTACH=CONFIG]20527[/ATTACH]
I have tried logging in on the Client machine using several different user accounts including the administrator, all of which can access the geodatabase in SQL Server management studio, but not connect to it in ArcMap/Catalog. Frustrating!!
I also took a look at the knowledge base article you posted, the first three solutions/work arounds I am certain I have already configured and/or enabled. The fourth (Add the Windows domain account into the SQL Server instance) I thought I had already performed during the initial installation setup wizard (from the ArcGIS Desktop install disk), something I also surmise from the fact that most of the user accounts in the attached image have the domain name "DAVIDSDOMAIN\" infront of them. I might be wrong though, is there any way you (or anyone readying this)could provide me with instructions on how to verify this?
Thanks in advance to anyone out there that can help me solve this one!!