When connecting to a SQL Named Instance, you may encounter a Timeout error when trying to connect to it if the client is Vista or Windows 2008 with the client Firewall enabled. This particular issue is only present if you are running the SQL 2008 Browser Service.
The browser service is what allows us to connect to a SQL Named Instance by using the friendly instance name (i.e. MyServerSqlInstance) as opposed to the server and port (i.e. MyServer,2508). When connecting to a Default Instance, which is running off of port 1433, we do not use the SQL Browser service and will therefore not encounter this issue.
This issue, along with possible workarounds, is documented in Books Online under the “Unusual Errors” section:
Also note that this could affect a SQL 2005 Named Instance as well if we are running the SQL 2008 Browser Service on the box. After you install a SQL 2008 Instance, both SQL 2005 and SQL 2008 will share the same SQL Browser Service.
We wanted to point this out as it is not a typical timeout error and may be hard to pinpoint. So, if you are running on Vista or Windows 2008, when trying to connect to a SQL 2008 Named Instance, and experience a Timeout, take a look at the firewall on the client side as this may be your issue.