CF8 and MS SQL 2000

I'm having quite a bit of trouble connecting to a local MS SQL database I've created. I have a fresh install of CF8 dev version, and am using the MS SQL 2000 eval version. I can connect to a remote SQL DB just fine, the problem comes when I try to login to a local DB. This is the error I get:

Connection verification failed for data source: noblesqlLOCAL
java.sql.SQLException: [Macromedia][SQLServer JDBC Driver]Error establishing socket to host and port: localhost:1433. Reason: Connection refused: connect
The root cause was that: java.sql.SQLException: [Macromedia][SQLServer JDBC Driver]Error establishing socket to host and port: localhost:1433. Reason: Connection refused: connect


I have seen some people have solved this problem by updated to SP3 or SP4. I've tried doing these updates, but once they are done my CPU will go to 100% and SQL Server will not launch.

So, any ideas? Should I try to get these service packs working? If so, any idea what I'm doing wrong?
Or, is it a problem with my configuration?

I have my SQL Server settings set up to use Windows and SQL Server Authentication.
In CF when adding the database I use:
Database: noblesqlLocal
Sever: 127.0.0.1 (I've also tried leaving it blank and typing localhost)
Port: 1433
Username: sa
Password: thepasswordiset
I've also tried leaving them blank....

Everytime I get the same error!

Please help I've been trying to get this to work for what seems like forever. Thanks!