it's not really a permissions error. SQL express 2005/2008 has 2 ways of working, either as user instances or server instances (see http://msdn.microsoft.com/en-us/libra...). If you use user instances your connection string will look like this :

<add name="SiteSqlServer" connectionString="Data Source=.\SQLExpress;Integrated Security=True;User Instance=True;AttachDBFilename=|DataDirectory|Database.mdf;" providerName="System.Data.SqlClient" />

The keypart here is the AttachDBFilename - this is what tells the sql express service to open it from the directory (actually in administrator mode) whenever a web request asks for data from that connection

If you attach a sql express database to a server (e.g. to use sql server management tools) you've moved it out of that mode i.e. it has a persistent connection to the files. Hence when you start your website it tries to connect to the file(s) but see's that something has a persistent connection, therefore the files are not available as user instances. As you can't connect to the database the install wizard will then kick off as it assumes you want to connect to another place e.g. change the connection to point to your server instance.

The "hack" you've done is to set System, so user instances and server instances use the same account, so see it as only 1 connection. This is quite dangerous, as potentially any sql injection could affect file(s) on the server. I recommend you stick with one model or another.

Cathal