O, I forgot, I am running JBOSS 3.0.2
Which MSSQL JDBC driver are you using? (Microsoft, i-net, DataDirect?)
It varies between different vendors - e.g. using the i-net Opta driver, for the SQL server instanced named 'myinstance' on IP 192.168.2.201
I'm not so familiar with the other drivers, but try putting either a forward slash, or two backslashes between the host name and the instance name in your connection string.