Shiland:
David is close to the answer you need but he does not say exactly why. The thing is that with SQL 2005 there is a new data access model (available to ASP.Net 2.0 and ADO.Net 2.0) where you don't have to specify the connection string like in previous versions of SQL Server. With DNN 4.x and SQL Server Express 2005, you don't have to change or even specify the initial connection string. The basic installation of DNN assumes that the database file is in the directory App_Data under the root of the DNN install. Also, in case you are familiar with SQL Server 2000, you don't have to attach the database file for DNN (or actually ASP.Net 2.0) to use it. This is also a new feature of 2005 that confuses a lot of people familiar with SQL 2000. 2005 now uses what is called a user instance, where the database can be easily distributed (a la XCopy) and the application can start using it right away as long as the SQL 2005 engine has been previously installed.
By the way, you will not be able to see or manage the default database with SQL Server Management Studio Express, there is a way to do it, but you would need to attach the database using a process similar to what is done with SQL 2000 and then you will need to change the connect string. There is a detailed article you can find in this forum with the step by step process to do that.
I don't know what went wrong with your initial install, the new installation process is pretty flawless. If you are still having problems I would recommend that you put the connect string back to the default. That is, unless you use SQL 2000, a database on a separate server, or 2005 on the same server using a regular database instance (known as a "named instance").
For more info on user instances in 2005 check this article: http://msdn2.microsoft.com/en-us/library/bb264564.aspx
Carlos