The material at the following link at MSDN is very helpful: "Windows 2000 and SQL Server Security" (includes XP)

http://msdn.microsoft.com/library/default.asp?url=/library/en-us/modcore/html/deconwindowsntsqlserverlogins.asp

Using Win XP -- I was having problems with error message: (as user <localhost>\xxxx_dnn): "The user is not associated with a trusted SQL Server connection". The Installation Guide was insufficient on user permissions. I had followed the following steps as instructed: 1) Created an XP login [xxxxx_dnn] and 2) granted myself permissions to the DNN directory, 3) created an SQL Sever 2005 login as same, 4) created the DotNetNuke database, and 5) added the new login as a user for the database. But I was still getting the error and the installation failed.

(step 6) What cured it was going to Windows' MMC, the Computer Management applet, including my user account as a member of all the SQLServer groups I could find as follows: Under Local Users and Groups, select Users. Right click User account [xxxx_dnn], click on "Properties", go to "Member Of" tab, click on "Add", click on "Advanced", click on "Find Now", and select all the SQL Server groups that appear. Then click on each "Ok".

Then I surfed to the DNN virtual directory and - Voila - DNN installation was finally successful.

Any feedback would be appreciated. Maybe I did it the hard way, and I don't want to confuse anyone or leave myself open for additional problems down the road.