I believe that the problem you are encountering is because of this line in your script:DB__VERSION_DBO_DEFAULT___2_ = "C:\Program Files\Microsoft SQL Server\MSSQL10.SQLEXPRESS\MSSQL\DATA\DB.mdf"
In your script you are specifying the SQL Server data file for your geodatabase. This will not work in ArcGIS.When specifying the output geodatabase you need to use the database server connection or the database connection to your geodatabase usually this will be something like this:Database Server:r'Database Servers\RUSSELL_SQLEXPRESS.gds\QADatabase (VERSION:DBO.DEFAULT)'
Database Connection:r'Database Connections\production.sde'