I am trying to build a website for my church using DNN.  I downloaded the latest version and took following steps.

1.  unzip to c:\inetpub\wwwroot\dotnetNuke

2.  gave full access file permission to Asp.net acct and network service acct at the dotnetNuke root level and down

3.  Created a virtual directory that uses framework 2.0 and allowed execute scripts and excutables.

4.  launched http://localhost/dotnetnuke/install/install.aspx?mode=install

since i am using the sqlserver express edition, i thought i could leave the sqlconnection as is, but it says it can't connect to sql. 

What am i doing wrong?

I also tried using Starter kit, and it worked like a charm if i compile and run with the file webserver.  however the site does not work if i copy the working site to a virtual directory with the same permission as above.  I just want to get this DNN to work.  please help.

I thought default should be used if i am using the database.mdf file in the appdata folder.  I think your connection string applies to using the SQLServer, right?

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

and also tried

    <add name="SiteSqlServer" connectionString="Data Source=.\SQLExpress;Integrated Security=True;User Instance=True;AttachDBFilename=c:\inetpub\wwwroot\dotnetnuke\appdata\Database.mdf;" providerName="System.Data.SqlClient" />